PPP- Features

• Partnership between state and private sector

• PPP provides infrastructure in times when government faces budget
constraint
• PPP encourages efficiency in delivery of infrastructure services
• Cost saving of private operator due to consolidation of responsibility
into single entity
• PPP enables infrastructure to become a competition rather than a
monopoly
• PPP provides a potential filter for “white elephants”
Public sector comparator(PSC)
• PSC provides benchmark against which the bids for PPP are assessed
• PSC under PFI program consisted of two components
• PV of expected Life cycle cost including foreseeable risks
• Adjusting cost estimates for “optimism bias”
• Victoria’s PSC consisted of four components
• Raw PSC
• Competitive neutrality adjustment
• Transferable risk
• Retained risk
Discount rate
• Initially applied 6% to both PSC and private options
• Victoria’s methodology was hence developed with core principle of
systematic risk being taken by public sector, private sector or shared.
• The approach used CAPM model which was
Ra​=Rf​+βa​(Rm​−Rf​)