Public-Private Partnership (PPP)
In a context of increasing privatization and reduction in the investment capacity of public administrations, the private sector plays a key role in the renovation and improvement of infrastructure.
It is within this context that the concept of public-private partnership has arisen, also known as PPP or P3.
What Are Public-Private Partnerships?
There is no standardized definition of the 3P model. As defined by the World Bank, a public-private partnership refers to “an agreement between the public sector and the private sector in which part of the services or work that are the responsibility of the public sector are provided by the private sector, under a clear agreement of shared objectives for the provision of the public service or public infrastructure.”
Applied to the specific setting of infrastructure and construction, P3 models confer major advantages, including the following:
- Faster execution of the project. The private company is directly responsible for identifying where efficiency may be improved in the initial phases of a project.
- Smarter infrastructure. The private sector contributes its knowledge of the sector and of the most innovative solutions and technologies that are being put into practice.
- Freeing up public funds. Having the funds provided by the private sectors, public administrations may allocate resources to cover other needs.
- Transfer of risks from the public sector to the private sector. The risks to which the public partner is exposed are reduced by transferring a significant percentage of them to the private party.
- Economic growth. Large infrastructure projects directly and indirectly create jobs and stimulate economic development.
Our Role in Public-Private Partnerships
As a leading construction and infrastructure management company, we participate in various publicprivate partnerships, with particular importance in the highway and airport sectors.
In the highway sector, through our subsidiary Cintra, we have proven our ability to innovate and the improved efficiency in the management of these traffic infrastructures. By applying the innovative concept of dynamic pricing in networks of managed lanesto Texas highways (LBJ TEXpress, NTE 3A/3B and NTE 35W), I-77 in North Carolina and I-66 in Virginia, United States, Cintra developed highly complex projects in record time thanks to the collaboration with public entities starting in the project design phase. These highways are showing indisputable results in improving congestion both in the paid lanes and the rest of the corridor.
In the case of airports, an infrastructure belonging to a local administration is seen to be clearly strengthened under the management of a private actor with the ability to innovate and effective solutions to increase air traffic and the commercial activity of the airport complex. Thanks to our experience and financial capacity, our participation in public-private partnerships allows the administration to maintain control and ownership of the infrastructure while increasing the profitability of the assets, improving the experience of users/passengers, developing the infrastructure and optimizing operating expenses, among others.
The role of our construction subsidiary, Ferrovial Agroman, is key. Vertical integrates gives us a very significant competitive advantage, enabling us to collaborate closely both during the bidding phase, by designing the optimal solution for the customer (both from a cost reduction perspective and income generating capacity), and the subsequent execution of the work. Given the long term of PPP contracts, the ability to design and build with the incentive of ensuring efficient operation and maintenance during the entire contract results in more efficient projects that create more value.