Our Foundation’s Private Public Partnership Initiative

09/11/2012

Private Public Partnerships (P3s) are a key part of revitalizing Rome and transforming the Eternal City into a beacon for the Third Industrial Revolution. In 2012, Roma Capitale, along with other Strategic Partners, are forming the Roma Capitale Investments Foundation to promote, stimulate and help implement P3 projects – primarily by working with and supporting public agencies as they develop partnerships with the private sector.

What are Public Private Partnerships (P3s)?

A private public partnership is a legally-binding contract between Roma Capitale, and other government agencies, with business for the provision of assets and the delivery of services that allocates responsibilities and business risks among the various partners. In a P3 arrangement, our Foundation will remain actively involved throughout the project’s life cycle. The private sector is responsible for the more commercial functions such as project design, construction, finance and operations.

P3s take a variety of forms, with varying degrees of public and private sector involvement – and varying levels of public and private sector risk. In fact, risk transfer from the public to the private sector is a critical element of all P3s. The goal is to combine the best capabilities of the public and private sectors for mutual benefit.

Why would the private sector be willing to assume these risks? Because where risk exists, so does opportunity. The private sector partner gains a relatively stable, long-term investment opportunity. Revenues are in the form of:

1) a fee for service paid by the government;

2) part ownership of the projects where appropriate;

3) sharing of fees collected from users;

4) lease back of infrastructure created by government agencies;

5) Above average returns on investment as the economy improves from the current financial crisis.

Private firms also use their own strengths and abilities to add value to P3 arrangements. For example, a private sector partner might find efficiencies or employ innovation to offset risks and costs. The private firm could also potentially increase its revenues by ensuring the most efficient business and operational structures possible. Further, the private partner would also be building P3 expertise, which could then be marketed in other sectors or jurisdictions.

What are the benefits of P3s for Roma Capitale and taxpayers?

P3s provide an opportunity to:

Improve service delivery
Government’s core business is to set policy and serve the public. It is better positioned to do that when the private sector takes responsibility for non-core functions such as operating and maintaining buildings.

Improve cost-effectiveness
By taking advantage of private sector innovation, experience and flexibility, P3s can often deliver services more cost-effectively than traditional approaches. The resulting savings can then be used to fund other needed services.

Increase investment in public infrastructure
P3s can reduce government’s capital costs, helping to bridge the gap between the need for infrastructure and Roma Capitale’s financial capacity.

Reduce public sector risk
By transferring to the private partner those risks that can be better managed by the private partner. For example, a company that specializes in operating buildings may be better positioned than the government to manage risks associated with the changing demands of commercial real estate.

Deliver capital projects faster
Making use of the private partner’s increased flexibility and access to resources.

Improve budget certainty
Transferring risk to the private sector can reduce the potential for Roma Capitale’s cost overruns from unforeseen circumstances during service delivery. Services are provided at a predictable cost, as set out in contract agreements.

Make better use of assets

Private sector partners are motivated to use facilities fully, and to make the most of commercial opportunities to maximize returns on their investments. This can result in higher levels of service, greater accessibility, and reduced occupancy costs for the public sector.

What are the benefits of P3s for the private sector?

P3s give the private sector access to secure, long-term investment opportunities. Private partners can generate business with the relative certainty and security of a government contract. Payment is provided through an agreed upon revenue sharing or ownership splitting Contract.

Private sector partners can profit from P3s by achieving efficiencies, based on their managerial, technical, financial and innovation capabilities. They can also expand their P3 capacity and expertise – or their expertise in a particular sector – which can then be leveraged to create additional business opportunities.

How are P3 partners 5ELECTed?

Our Foundation will choose P3 partners through a fair and competitive bidding process. Typically, the agency sponsoring the project will invite the private sector to submit proposals, detailing plans for meeting service delivery needs. Proposals are then evaluated to ensure they deliver value for money for taxpayers and protect the public interest.

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