Public Private Partnerships (WS)

Compiled by:
Dörte Peters (seecon international gmbh)

Executive Summary

The public sector might not be able to cope with the challenges regarding sanitation and water management and therefore cooperates with the private sector through a "partnership". Public Private Partnerships (PPPs) are partnerships between the public sector and the private sector for the purposes of designing, planning, financing, constructing and/or operating projects, which would be regarded traditionally as falling within the remit of the public sector (INWRDAM 2010). Here, we will concentrate on the advantages of a PPP in sanitation and water management, and explain step-by-step how the implementation of such a PPP works.

Public Private Partnerships for Sustainable Sanitation and Water Management

(Adapted from INWRDAM 2010)

Building PPPs is one possible step when building an institutional framework for sanitation and water management. More information on building an institutional framework for sanitation and water management might help to get an overview of what else can be done (see institutional framework). In general, sanitation and water management can be in public hands (see nationalisation), or in private hands (see privatisation) or it is a mixture of both, like with PPPs.

Making water and sanitation services accessible for everyone is one of the main targets of the Millennium Development Goals (MDGs). It is also the core responsibility of both national and local governments to satisfy the legitimate (human) rights of all citizens and safeguard the interests of the poor. In this regard, governments are increasingly seeking professional expertise through various forms of PPPs, which are expected to significantly contribute to achieving local and national objectives in affordable ways. PPPs are thus one institutional option to cope with the challenges of water and sanitation services, and they take part in the process to enable the environment for sustainable sanitation and water management.

Public private partnerships open up opportunities for private investments, which can result in the realisation of projects. Those projects would otherwise, based on the classic (budgetary) funding, not be possible or would require much longer periods of time for implementation, which is often not acceptable where certain public services or their adequate level should be ensured promptly (APPP 2009). A key objective of a PPP is to allocate responsibility to the person(s) best placed to manage and deal with the task. Certain responsibilities may be more effectively managed by the private sector rather than the public sector (INWRDAM 2010).

The private sector has always been involved in the water and sanitation sector in some form or the other, from tendering for construction contracts in large urban supplies to the informal provision of vended water in unserved areas. However, a new role is currently being shaped due to globalisation and the importance of PPPs in the water and sanitation sector is increasing (INWRDAM 2010).

Public private partnerships are different from privatisation in that the right to use public property is granted to a private partner for a definite period of time (such as the agreed term), and on expiration of the term the property usually goes back to the public sector in its original state or subject to a fee if investments were made to increase its value (APPP 2009).


Actors in a PPP

(Adapted from SDC et al. 2005)

Examples of Actors in a Given PPP. Source: SDC et al. (2005)

  • Contracting parties: local authority, service operator
  • Key stakeholders (strongly influencing the PPP): both (all) contracting parties, national and municipal governments, investors, regulators, donors, trade union(s), consumers and NGOs
  • Stakeholders (affected by the PPP): All above, households, community and gender groups, beneficiaries, etc.

Agencies for PPPs might also be helpful to make the implementation process of a PPP easier, to delegate a function and therefore make sure the PPP is going to work well.

You can see how the spheres of each actor involved in a PPP overlaps with the spheres of the others in the graph above.

Things to Consider

(Adapted from FARLAM 2005)

PPPs do not only have advantages. There is a wide discussion about giving the “public good” water and sanitation in the hands of private parties. The decision whether a PPP is the right option for sanitation and water management needs to be made with some considerations to make sure it works well.


  • The private sector is not always more efficient than the public sector
  • Service provision is often more expensive for the consumer with PPPs
  • PPPs need complex and demanding contracts
  • Finding a private partner and working out the contract might be very time-consuming
  • A system for the monitoring and the enforcement of the articles in PPP contracts needs to be in place (see also strengthening enforcement bodies)
  • Clear definition of roles and responsibilities of different stakeholders are needed
  • The exposure to disputes needs to be clarified in the contract


In some cases, a fully private or a fully public structure will make more sense. Read more on these options here:



How to Implement a PPP

(Adapted from APPP 2009)

 WSP (2003)

Co-operation is needed for a well functioning PPP. Source: WSP (2003)

The basic concept of any public private partnership (PPP) is simple: instead of funding and building a distribution network, kindergarten, public garage or other facilities and infrastructure on its own (in this case related to sanitation and water management), which is followed by operation and maintenance and the provision of end services, the public sector concludes a long-term contract with the private sector which then performs all or part of the activities in place of the public sector.

The public sector retains only its regulatory and supervisory function (such as the laying down of standards for the services rendered and the surveillance of conformity). On the other hand, the private sector may collect a fee for the services rendered directly from the end user (and bear the risk of market demand) or from the public sector in the form of rent and the like (and bear the risk of availability of the facility/infrastructure). The private sector usually also undertakes the tasks such as maintenance, operation and similar tasks, and assumes the risks which the private sector can manage better.
One of the main challenges in introducing PPPs lies in the proper definition of structures and ‘rules for the game’ for all actors: roles and responsibilities must be assigned and regulatory mechanisms must be established from the outset. What is more, a PPP can only be successful if the involvement of civil society is ensured. Not surprisingly, these issues are crucial for public utilities as well. Yet, while under public service provision, the relevant policies may be adapted gradually, in a PPP, the “rules of the game” need to be set from the start (SDC et al. 2005).
In the following, a step-by step guide leads through the implementation of a PPP for sanitation and water management in seven steps (adapted from APPP 2009):

Step 1 — Strategic Planning

Before any drawing-out and proposing of potential projects, it is necessary to set long-term strategic goals which should be realised through the projects concerned. The “strategy” is a document which sets goals to achieve over periods in excess of 5-20 years. Periods of up to 5 years are covered by action plans, workflows etc.
Based on those plans, annual implementation plans (business, financial and others) are drawn up. Respect for the implementation of superior-priority projects ensures an optimum investment of time, money, and of natural and human resources. An important part of any strategy is the setting of measurable goals, a timeframe for their implementation, ensuring their wider social agreement and an assessment of the funds required (see also awareness raising and media campaigns). The strategic planning should also include political and state bodies, scientific institutions, NGOs and various other stakeholders. More on planning with the community can be found here.
The adoption of a strategy is its political confirmation. Thus, through adoption, it becomes part of the adopted policy (see policies and legal framework for more information). Long-term and stable political support and wide-ranging support provided by stakeholders are key preconditions for a successful implementation of any strategy.

Step 2 — Determining Strategy Implementation Goals and Selecting the Most Appropriate Implementation Solution

Good goal setting depends on what one actually wants to achieve as part of the strategy concerned and the specific objectives of the proposed investment/project. It is based on the accurate definition of the problem, where it is particularly important not to determine potential solutions in advance.
After goal setting, it is necessary to conduct an analysis of all potential solutions in terms of the strategy in question, but also within the framework of other adopted strategies. Solutions that include capital investments and those that do not need to be considered, and after the analysis of all solutions one solution needs to be chosen.
In order to ensure knowledge and skills that cannot be secured within the public sector, it is necessary to plan the retaining of outside counsel. Outside counsel should be picked through the public tender procedure.

Step 3 — Decision on Using the PPP Model and Research of Potential Investor

The decision whether it is justifiable to use the PPP model should be based on the knowledge whether the costs of the public sector (over the whole lifetime of the project) would be lower in the case of the PPP model than in the case of traditional procurement. If not, the use of the PPP model needs to ensure some other important advantage (such as easier access to the supply market, new knowledge, human resources, etc.).
In order to guarantee a successful implementation of the PPP-model, it is important to assure the interests of potential investors, and also the best possible competition by and between potential investors. Therefore, it is important to research the market interests before the publication and implementation of the public tender procedure for the selection of a private partner. If it turns out that there is no interest in the offered project on the market, its structure should be changed to make it more attractive to potential investors and tenderers.

Step 4 — Drawing up and Approving Tender Documents

When a project is approved, the contracting authority may begin to draw up tender documents for the selection of a private partner, i.e., the implementation of the project according to the PPP model.
The contracting authority must submit tender documents. The content should be in line with the project approved. The contracting authority also makes the decision which of the two possible public procurement procedures (the negotiated procedure or the competitive dialogue, see below) should be used in the case in question.

Step 5 — Implementing the Public Tender Procedure, Selecting the Private Partner and Contracting

Selecting a private partner is a public procurement procedure regulated in the legislation governing public procurement or in a concession award procedure. PPP contracts are therefore concluded as either public procurement contracts or concession contracts. At first, the decision on the public procurement procedure needs to be taken:


  • A negotiated procedure is a procedure whereby the contracting authorities consult the economic operators of their choice and negotiate the terms of contract with one or more of these.
  • A competitive dialogue is a procedure wherein any economic operator may request to participate and whereby the contracting authority conducts a dialogue with the candidates admitted to that procedure, with the aim of developing one or more suitable alternatives capable of meeting its requirements, and on the basis of which the candidates selected are invited to submit their tender.


After choosing the procedure, the procurement takes place and the private partner needs to be selected. What follows is the implementation of the contract (the delivery, controlling the subject-matter of procurement, payment, the guarantee, etc.).

Step 6 — Implementation of the Contract

Usually, one or both signatories must fulfil certain agreed preconditions for the entry into force of the contract, as it normally begins to run with the signing of the contract.
The most critical phase of contract implementation is usually the phase of construction or reconstruction of structures or infrastructure. Completion of the works (if agreed) is generally a precondition for the provision of the public service and the emergence of the payment obligation by either the final users, or the public partner. As soon as the works are finished, i.e., when the provision of the public service begins, receipts from the services rendered ensure a return on investment and the PPP project enters a safer phase of implementation.
In the phase where public services are already being provided, it is important for the public partner to ensure effective supervision of the standard of such services. A precondition for this is ensured through the contractual provisions which define the relevant standards, which the private partner is under the obligation to perform in the rendering of the services agreed, the organisation and procedures for ensuring effective internal and external supervision of the service standards, and a calculation of the rate at which the financial obligations should be reduced in the case where the services provided are not at the agreed level. The said provisions must also include the obligations and rights of the partners, such as the obligation of the private partner to ensure that the public partner has got access to the location(s) where the services are rendered, verification of the procedures and access to the relevant documents, access to financial documents, and the like.
In view of the long-term nature of PPP contracts, the occurrence of disputable situations is very probable, and it is extremely important to foresee the manner of their resolution in the contract. Disputes should be resolved as soon as possible and at the appropriate level in each organisation in order to avoid the unnecessary stalling of disputes.

Step 7 — The End of a Contract (by Expiry or Termination)

A PPP contract is concluded for a fixed term, and has — just like all other obligations — a limited duration, depending on the term stipulated in the contract.
In the case of PPP contracts and their regular extinction, they must include detailed provisions on the transfer of ownership. The most important issue which must be regulated in a PPP contract is the issue of the standard of quality of the accomplishment at the time of handover. All rights for using the transferred generated accomplishment must also be transferred to the public partner, as well as (technical) documents necessary for use. The public partner may have the obligation to take over any employees working for the private partner at the moment of handover whose jobs are connected with the issue.
In the case of contract termination, the main rule is that the parties are released from their contractual obligations, other than the liability for damages in certain cases of termination. Contract termination also results in the obligation of restitution of what was received as part of performance, and the return of any benefits, mostly in the form of pecuniary compensation, which the contracting party has accumulated from what it should return.


Public Private Partnerships are applicable in urban areas (including slums and informal settlements), small towns, and rural areas, as long as a serious private partner can be found.

PPPs do not necessary have to take over a big part of sanitation and water management. Contracts can also be made for small, specific sectors, so their applicability is good on a local level.

PPPs are not appropriate in the case of projects which result in fast technological and other changes, as it would be difficult to determine the standard of services rendered in the long-term and with an acceptable level of certainty. The provision for a sufficient level of contractual flexibility is necessary to adapt to such rapid changes, and at the same time to foresee and agree in advance on the cost of such adjustments (APPP 2009).


  • PPPs enable the public sector to profit by financial, business and other types of knowledge and skills and an innovative entrepreneurial approach in project implementation and management
  • PPPs open up opportunities for private investments
  • Functions can be delegated through PPPs
  • PPP contracts assure fairness of contracting parties


  • Preparation and implementation of PPPs is a lengthy and expensive process
  • Many stakeholders: might lead to disagreements about the change process
  • Contract design needs to be deliberate and is therefore very complex
  • One of the contracting parties might exploit missing conditions of the contract
  • There is a dispute of whether public goods such as water and sanitation should be (partly) privatised. Affordable services to all parts of society must be guaranteed

References Library

APPP (Editor) (2009): A Step-by-Step Guide to Public-Private Partnerships (PPPs). Croatia: Agency for Public Private Partnerships. URL [Accessed: 30.08.2012].

FARLAM (2005): Working Together. Assessing Public-Private Partnerships in Africa. (= Nepad Policy Focus Report No.2). The South African Institute for International Affairs. URL [Accessed: 31.08.2010].

INWRDAM (Editor) (2010): Public Private Partnership in Water and Sanitation Sector. Amman – Jordan: The Inter-Islamic Network on Water Resources Development and Management. URL [Accessed: 31.08.2010].

SDC; SWISS RE; SECO (Editor) (2005): Policy Principles-Framework for Sustainable Partnerships. Berne: Swiss Agency for Development and Cooperation (SDC). URL [Accessed: 22.05.2012].

WSP (Editor) (2003): Co-operation is needed for a well functioning PPP. URL [Accessed: 14.11.2011].

WSP (Editor) (2003): WSP 2003 Cartoon Calendar. Washington D.C.: The World Bank. URL [Accessed: 23.04.2012].

Further Readings Library

Reference icon

APPP (Editor) (2009): A Step-by-Step Guide to Public-Private Partnerships (PPPs). Croatia: Agency for Public Private Partnerships. URL [Accessed: 30.08.2012].

This step-by-step guide takes you through the whole process of building a PPP. Each of the seven steps is explained in a very detailed way and shows possible problems and solutions.

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EC (Editor) (2009): Mobilising Private and Public Investment for Recovery and Long Term Structural Change Developing Public Private Partnerships. Brussels: Commission of the European Communities.

This Whitepaper is about developing PPPs. It is very detailed, including information on potential challenges, and a section about what needs to be done on the way forward.

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KHAN, S.; COTTON, A. (Editor) (2003): Public Private Partnerships and the poor in water supply projects. Leicestershire: Water, Engineering and Development Centre (WEDC). URL [Accessed: 31.08.2010].

This factsheet is good to get an idea on PPPs. It offers a list of further reading material, and includes tips for the preparation of a PPP.

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THE WORLD BANK (Editor); WSP (Editor); IFC (Editor) (2013): Tapping the Market - Opportunities for Domestic Investments in Water for the Poor. (= Conference Edition). Washington: The World Bank, Water and Sanitation Program (wsp), International Finance Corporation (IFC). URL [Accessed: 05.09.2013].

To improve access to safe water, particularly by the poor, developing country governments and the international development community are looking to the domestic private sector to play an expanded role. This report examines piped water schemes in rural areas of Bangladesh, Benin, and Cambodia and concludes that in the three study countries, un-served people could increasingly rely on service provision through the domestic private sector as the potential market the domestic private sector could be serving is very large.

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THE WORLD BANK (Editor); WSP (Editor); IFC (Editor) (2013): Tapping the Market - Opportunities for Domestic Investments in Sanitation for the Poor. (= Conference Edition). Washington: The World Bank, Water and Sanitation Program (wsp), International Finance Corporation (IFC). URL [Accessed: 05.09.2013].

To improve access to sanitation, particularly by the poor, developing country governments and the international development community are looking to the domestic private sector to play an expanded role. This report examines private sector provision of on-site sanitation services in Bangladesh, Indonesia, Peru, and Tanzania and concludes that in the study countries, un-served people could increasingly rely on service provision through the domestic private sector as the potential market the domestic private sector could be serving is very large.

Case Studies Library

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FARLAM (2005): Working Together. Assessing Public-Private Partnerships in Africa. (= Nepad Policy Focus Report No.2). The South African Institute for International Affairs. URL [Accessed: 31.08.2010].

This document is about PPPs in Africa. Except for one case, the studies are not particularly about the water and sanitation sector, but are nevertheless interesting examples of PPPs.

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LARBI, E. (2005): PPP and the Poor in Water Supply Projects: The Ghanaian Experience. Leicestershire: Water, Engineering and Development Centre (WEDC). URL [Accessed: 31.08.2010].

Ghana has experience in working with PPPs in the watersector, which is documented in this factsheet. Especially the conclusions/lessons learnt are interesting for building PPPs in other countries.

Important Weblinks [Accessed: 28.08.2010]

Effective water governance for all water users is the goal of the initiative "Partnerships for Water". One of many methods to achieve effective water governance is through Public-Private Partnerships for water services. The site describes then themes that are crucial to develop good partnerships, plus an extensive library containing publications, case studies and best practice examples that help in developing effective water governance for all users. [Accessed: 31.08.2010]

This website describes a PPP in the water and sanitation sector in Amman, Jordan. Furthermore, you can find an overview on the purpose and aims of public-private partnerships in the water and sanitation sector.