Concepts and Mechanics of Evaluating Infrastructure Public-Private Partnerships: A discussion of key practical issues, illustrated through a case example

Abstract

This text presents and illustrates crucially important concepts about how to perform a proper economic evaluation of an infrastructure public-private partnership (PPP) and appreciate the contractual value implications for the partners. The discussion speaks to managers, policy-makers, and all those concerned with the development of infrastructure projects. The discussion pays special attention to the economic issues associated with contracts between public and private sector partners for infrastructure projects. Contracts can be powerful instruments in shaping both overall project value, and the benefits to the contracting parties.

The presentation starts with an overview of the concepts central to the evaluation of both general and PPP projects. It then presents the essential elements of the standard spreadsheet analysis of economic value. It illustrates the analysis using a realistic case study of a hypothetical public-private partnership for developing and operating a major international airport. This case provides a useful vehicle for illustrating the important concepts and mechanics of evaluating public-private projects.