Advantages
- Brings in private finance to public service delivery.
- Private players can deliver services more efficiently (lower cost, better quality).
- Fills the gap between fully government and fully private execution.
- Leverages private sector’s financial and technical resources.
- Can accelerate execution and delivery of large infrastructure projects.
- Helps governments facing fiscal deficits and public debt.
Challenges
- Poorly Designed Frameworks: Contracts focus on fiscal benefits over efficient service.
- Risk Allocation: Neglecting principles of allocating risk to the best-suited entity.
- Shifting Responsibilities: Government shifting land acquisition, clearances to private parties.
- Lack of Renegotiation Structure: No clear process for restructuring failed projects.
- Reckless Bidding: Bidders may be too aggressive, expecting government rescue.
- Fiscal Burden: Can lead to government subsidies if projects fail.
- Complexity: Difficult to design futuristic agreements for all scenarios.
- Public Perception: Can be seen as “buy now, pay later” schemes.