Meaning and transaction use
The World Bank PPP Reference Guide uses a broad definition centred on a long-term government-private contract, a public asset or service, significant private risk and management responsibility, and performance-linked remuneration. [S1]
The guide says functions may include design, construction, finance, operations and maintenance, with risks allocated to the party best able to manage them. [S1]
Proposed control method: retain an output specification, risk matrix, payment model, fiscal commitments, procurement record, performance regime, change procedure, lender interface and handback plan.
Worked example
Illustrative undiscounted payment schedule only. Assume a USD 20 million public capital contribution and annual availability payments of USD 8 million for 15 years, before deductions and indexation.
Scroll the table horizontally to view all columns.
| Measure | Calculation | Result |
|---|---|---|
| Base availability payments | 8 x 15 | USD 120 million |
| Capital contribution | Assumed | USD 20 million |
| Undiscounted base public payments | 120 + 20 | USD 140 million |
| Annual 5% deduction | 8 x 5% | USD 0.4 million |
| Annual payment after deduction | 8 - 0.4 | USD 7.6 million |
The illustration produces USD 140 million of undiscounted base payments before deductions and indexation. Fiscal analysis requires timing, discounting and contingent commitments.
Proposed transaction review process
Define public need
Set outcomes, service standards, affordability and procurement authority.
Allocate risk
Assign design, construction, finance, demand, operations, change and force majeure.
Procure and finance
Test competition, bankability, fiscal commitments and value for money.
Manage the contract
Monitor outputs, payments, changes, disputes, refinancing and handback.
Evidence checklist
Public case
Needs assessment, options, affordability and approvals.
Procurement record
Tender, evaluation, conflicts, award and disclosure.
Contract evidence
Outputs, risk, payment, change, termination and handback.
Performance evidence
Availability, quality, deductions, audits and fiscal reporting.
Decision framework
| Situation | Proposed action |
|---|---|
| A risk is not controllable by the private party | Reassess allocation and pricing before contract close. |
| A change is requested | Apply the contract change and affordability process. |
| Performance fails | Measure under the agreed regime and apply deductions or cure rights. |
| A contingent liability changes | Update fiscal reporting and approvals. |
Common errors to check
- Calling every outsourced public contract a PPP.
- Transferring risk without pricing or control analysis.
- Ignoring long-term fiscal and termination commitments.
- Measuring inputs while the contract pays for outputs.
Structure the PPP
Bring the public need, output specification, risk matrix, payment model and fiscal analysis to a PPP review. Align responsibilities, incentives and long-term affordability.
Discuss the transactionPrimary references and editorial scope
- World Bank: PPP Reference Guide introduction
PPP definition, functions, risk allocation and performance linkage. Reference checked 17 September 2026.
General infrastructure-finance education. Figures are hypothetical. Procurement, fiscal, accounting, legal and disclosure requirements depend on the jurisdiction and contract.
General business information. Obtain advice appropriate to the legal, tax, accounting and financing facts. No offer, lender commitment or transaction outcome is represented. All worked examples use expressly assumed figures. Editorial draft date: 17 September 2026.
