Worldwide there is a variety of definitions for Public-private-partnership (PPP). According to the country-specific background or the interests of the respective author, the goals and contents may vary. Some academics and industrial practitioners still perceive the definition of PPP as ambiguous. In some cases, the term PPP describes a wide range of agreements that imply the externalisation of the government’s responsibilities towards private commercial partners. The aim is to divide the risks and benefits between the public and the private sector to achieve goals, which contents are connected to the public order (Alfen 2009). A universal method for the implementation of PPPs does not exist. Every country, in terms of culture, economy, political climate and legal system, has its own framework conditions.

PPPs are characterized by a long-term, contractually arranged cooperation of different stakeholders from the public and the private sector. Tasks, that previously were to be addressed by the public sector, now can be specifically and efficiently segmented in between the partners. Efficient segmentation of tasks and responsibilities has the potential to result in a minimisation of the project's risks, as well as a combination and distribution of resources and know-how in between the stakeholders (Alfen 2009).

If used in the development of infrastructure, PPPs include the participation of the private sector in one or many planning, building, financing and operating phases of public infrastructure, a public service or both. Examples for infrastructure, developed through the application of PPP-models, can be found worldwide. Due to the capital-intense character of basic infrastructure and the competition over limited budgetary resources, the governments have arranged for private investors to fill in the growing supply and demand gap. The governments simultaneously make efforts to fulfil the social liabilities within the limited financial means to their disposal (Alfen 2009).

In industrialised countries, PPPs are used to meet the demand of public services, such as education, health services, waste management and public buildings. Many industrial countries are characterized by a high and ever growing demand for basic infrastructure. In these countries, PPPs are used to uphold the economic growth. The cooperation with private partners is often seen in the electricity-, water-supply-, or the road-sector (Alfen 2009).

The cooperation can take place according to different models: Build operate transfer, leasing models, or management contracts.

Furthermore, it is important that all parties soon-to-be involved in the PPP, have a common understanding of the rules of its underlying structures.  The public and the private sector have to negotiate an agreement about key topics and their ranking (Alfen 2009).

PPP has the potential to contribute to the reduction of urban sprawl, well-balanced land conversion and access to urban land. Through contractual agreements between the partners, a PPP can contribute to the improvement of environmental and living standard conditions and also, in case of infrastructure projects, to provide efficient and affordable transport. Additionally, successful implementation of PPP has the potential to strengthen and improve a municipality in a whole variety of aspects by including the participation of local stakeholders (Box 1).

Key Words: Cooperation, negotiation, voluntary, stakeholder, land development, realization, urban planning

Besides social challenges, the limited financial budget of municipalities in urban development is often a challenge. By bringing together developers and the municipality, usually working as a development company, it is possible to jointly promote socially integrative cities. PPPs allow the joint design of urban development projects, minimizing costs and risks for each of the parties.

The instrument is used in European countries. In discussions within the project it became clear that it has potentials to promote socially integrative cities in general.

The individual stakeholders benefit in this symbiotic cooperation since the reliability is partially created through the shared risk. Both partners are interested in a successful process and therefore a successful outcome since each partner will share future profits and benefits. This is a main driver for planning security but at the same time limits the area of application to those projects that, a positive outcome provided, have an expectation of profits for the private partner. The municipality can assure these profits by e.g. taking over the project at a specific rent agreement over a negotiated time span (Meyer 2016; Schaeffer and Loveridge 2001; Boll 2007).

The partnerships take place in areas that previously were state/municipality-only-tasks such as the design of planning processes, creation, financing, management, administration, operation, maintenance and provision of public services. This joint approach enables the partnership to address projects and take problems that previously none of the partners were individually able to do. Not only does the partnership enable the individual partners to address a greater variety of problems, but it also maximises the scope of responsibility that can be taken (Boll 2007).

The identification of the risks of a planning process provides the foundation for the success of every PPP. Different stakeholders have different fields of expertise and it is crucial, that the individual stakeholder should only be assigned with tasks within their know-how. Choosing the most qualified stakeholder to deal with a certain risk, ensures to achieve the best possible efficiency.

Another success determining factor for PPPs is the projects financial structure. The project has to ensure to combine the expected costs of the project with sufficient (financial) incentives to ensure the stakeholders ability to profit from their work within the PPP. By doing this, the government or the municipality wants to ensure a high standard of the stakeholders’ performance within the project.

The financial structure of PPP projects is often characterised by a high debt burden. Usually, the government or the infrastructural investment funds provide a certain portion for the PPP project. The part of the external financing is provided by commercial banks, the capital market as well as national or regional development banks (Alfen 2009).

Therefore it is important, that all parties soon-to-be involved in the PPP, have a common understanding of the rules of its underlying structures.  The public and the private sector have to negotiate an agreement about key topics and their ranking (Alfen 2009).

Added values from PPP are quick agreements as well as short planning processes, voluntary association and participation of local stakeholders. Main strengths of PPP are:

• Segmenting risks and responsibilities enable gains inefficiency. Souverain tasks mainly stay with the public sector, while the private sector carries out the implementation.
• A project’s long lifespan enables the investor to achieve financial profits after some years
• Private investments ensure an interest of completing a project successfully (sense of responsibility)
• Private investors obtained long term contracts (distribution of tasks concerning the individual partners’ strengths; obligation to implementation through a contract).
• Cooperation can drive innovations, especially through performance specification, service level and mechanisms of payment.
• Strengthen competition.
• The potential of a knowledge transfer from the private to the public sector.
• Gains in efficiency within the public sector can lead to the restructuring of the sector. Experiences and lessons learnt from the private sector are considered (partially through the inclusion of private capital from the private partners)

Through the cooperation, the private partner achieves cost and planning security and is therefore enabled to finish a project at an accelerated pace. For example, urgent infrastructure projects are now provided quicker to the municipality and its users than before. PPP poses an option for governments to mobilise private assets and expertise, not only for the development of urban areas but also for the revitalization of declining neighbourhoods.

Growth in cities and towns has both positive and negative aspects. Besides positive aspects of economic power, a rising attractiveness of the location and a rising influence into the surrounding area, growth also challenges a city with providing infrastructure, developing new areas and a rising (financial and organisational) effort. From it occurs the challenge to realize a necessary amount of projects while money, in the municipal budget, often is in short supply.  (Llorente and Vilmin 2017, Gerstlberger and Schmittel 2004).

PPP can serve as a tool to reduce the burden on the municipalities´ budgets. PPP also offer long-term cooperations between public and private stakeholders, who share the responsibilities and risks of urban development. The (local) private sector is able to contribute with their experiences and know how towards the process and the partnership.

Municipalities have the greatest chance of implementing their own interests without making compromises if they have sole planning authority. In PPP projects, various stakeholders cooperate, which can also have an impact on the design and implementation of the planning projects. The municipality can be outvoted in votes on individual planning steps by other partners, or in some cases cannot even have a say in the decision. If the municipality has its own budget available, a PPP is not worthwhile. The private sector has a clear profit expectation. Costs and profits are covered by the rental income.

PPP-projects which require considerable private investments like Build Operate Transfer (BOT) depend on the participation of established and financially sound private partners with various perspectives. These differences can lead to different perceptions on if and how to realise projects.

The public sector has to negotiate carefully to not see his own interests remain unconsidered during the process. Nevertheless, by definition of PPP, the public sector has to give a certain share of responsibility away to the private sector. Especially considering projects of the area of services of public interest that require a high operational and maintenance standard are in danger to fall victim to the profit orientation of the private sector. The public sector has to ensure the monitoring of the competitiveness and efficiency of the acquisition system, as well as the fulfilment of environmental and safety standards.

High-end innovative technologies used in construction projects may contribute to higher costs for the user. Toll fees can serve as an example: The more cost intense the construction project, the higher the price for the user.

Private investors are confronted with expenses before the project is finished and therefore profitable. This means, for the time being, a financial burden on the private investor (Alfen 2009).

An example of a community centre will illustrate the characteristics of the procedure: The private partner builds a centre and is responsible for its maintenance and operation. Private investments into the centre ensure a strong self-interest in a high-quality and sustainable result. This result is a gain in efficiency for the public sector. Efficiency gains compared to conventional procurement variants essentially mean the transfer of risks from the public sector towards the private partner. The advantage of the use of this instrument, from the perspective of the municipality, is the reduction of the volume of backlogs in the renovation process, a reduction of the burden on the budget, and distribution of risk in between all partners involved (Boll 2007).

Rostock, Mecklenburg-Vorpommern, Germany

In the area of Rostock (map), the river Warnow has the shape of the letter “u”. The historical centre of the city is located in the south. Geographic conditions led to a significant stream of traffic running through the city centre. The increase in traffic (60.000 vehicles daily) lead to traffic jams and a reduction of attractiveness and possibilities for development. This situation put stress on the inhabitants, local economic deployment, and the surrounding of the entire Region. The city found itself confronted to find a solution for these challenges. The cities decision-makers decided for the innovative approach of the construction of a tunnel – the so-called Warnow-crossing.

This tunnel was the first project, that was designed, built, financed and operated by a private party. At the same time, it was the first project to be refunded from the users financing (Continue reading https://warnowquerung.de/en/). According to the contract between the city of Rostock and the project corporation, the duration of the concession has been determined on 30 years.

The plans for a tunnel, crossing the river Warnow reach back into the 1960s. In 1992 the tunnel was included in the Federal Transport Infrastructure Plan but assigned to the category of project with a low priority. Prompt implementation of the project was not intended. In 1994, Rostock’s citizen council decided to realize the project as a concession in the course of a PPP program. An international tender was introduced that included statements about the right of planning, financing, construction, operation, maintenance and charging of toll fees. The French contractor Bouygues Public Traveaux was chosen as the prioritised bidder and accepted the offer.

The construction of the tunnel has a significant influence on the economy since the infrastructural condition has direct influence on the local economic success and the appeal of the location.

Following advantages resulted from the PPP for the city:

• Discharge on the communal road system

• Appropriate signposting resulted in a targeted redirection of the traffic (discharge of the inner city)

• Shortening of commuting and travelling duration

• Strengthening the local economy. Rostock’s marine harbour and the industry around it are located in the inland

• Tourism is profiting

Vathorst, Amersfoort, Netherlands (map)

VINEX - The fourth Dutch Ten Year Housing Programme (1995-2005) identified the best places for growth, and the principles to guide development [1] as a reaction to a housing crisis. VINEX invited local authorities to submit bid schemes for the programme. In Amersfoort, a historic town near Utrecht, three urban expansion areas were built: Kattenbroek, Nieuwland and Vathorst, each with a different character and all well connected with the city centre (URBED, 2012).

Vathorst, the largest one, was the last to be built. It differs from the earlier expansion areas in being a free-standing settlement with a large business park and shopping centre and with community facilities from the start (Falk, 2008).

The initial development vision for Vathorst came from the public sector with the local authority reacting to the VINEX call. The Vathorst development company (OBV) was created in 1998 between the city council as one shareholder (50 %) and a consortium of 5 private companies (Heijmans, the Alliance, AM, BPD and Dura Vermeer) as the other [2]. This Public-Private-Partnership (PPP) by contract included investors who had bought land in the area but also those who the city wanted to involve because of the work they have done before (Falk, 2008). OVB is responsible for land acquisition, urban planning, engineering, commissioning infrastructure and allocating sites (Falk, 2008); and its mission is to create a pleasant and attractive living and working climate for the approximately 33,000 residents [3]. OBV employed a small staff of personnel, with a chief executive from the private sector and a chairman appointed by the municipality. Most of the developers and constructors were members of the company (URBED, 2018).  Additionally, OBV provided advanced infrastructure through a loan at preferential rates. Serviced plots could be sold off to a multiplicity of builders, including two housing associations.

By this time more than 75 % of the approximately 11,000 homes have been built and inhabited by approximately 26,000 people. About 1,600 homes are still being built. And the business park is also still under construction. Last homes are expected to be completed by the end of 2023 [4].

[1] Under the VINEX Programme 455,000 new homes were built over in 90 new settlements, of which 285,000 were developed on greenfield sites or urban extensions of major towns and cities (URBED 2008a)

[2] https://www.vathorst.nl/over-vathorst/ontwikkelingsbedrijf-vathorst/ (retrieved May 7, 2020)

[3] https://www.vathorst.nl/over-vathorst/ontwikkelingsbedrijf-vathorst/ (retrieved May 7, 2020)

[4] www.vathorst.nl/over-vathorst/ontwikkelingsbedrijf-vathorst/ (retrieved May 7, 2020)