Public-Private Partnerships for Government Financing, Controlling Risk, and Value-for-Money: The UK Experience

One of the key requirements to a successful Public-Private Partnership (PPP) is the transfer of risk from the government to the private sector. This report examines the PPP experience in the United Kingdom's (UK) Ministry of Defense to determine if it would be applicable to the U.S. Department of Defense (DoD). The report also provides an in-depth analysis of Private-Financed Initiatives (PFI) that Serco Inc. has undertaken, and evaluates the increases in value-for-money resulting from the PPP transfer of risk to the private sector. The authors conclude that PPPs should be continued and expanded to provide increased real-time capability to the DoD, while supporting private industry. Since the government has the lowest cost of borrowing, PPP agreements may not appear to be cost-effective as a means of procurement. However, the benefits from transferring risk to the private sector can more than offset the higher financing costs. PPPs reallocate risk and up-front capital requirements, allowing the government to spread program costs over time. Without initial capital outlays the government can acquire higher priority goods and services with its limited resources. In addition, PPPs provide the government with an increased infrastructure and technological capability that would otherwise not be available. Acquisition Research Sponsored Report Series. The original document contains color images.