What is Public Private Partnership (PPP)
A public-private partnership (P3) is a contractual arrangement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public.
For example for building a road which is a government responsibility, govt . may tie up with some private player who will contribute not only money but expertise. Private Player would in return get to make profits by charging toll tax for a certain period of time They are also called 3Ps or P3s.

Why it is needed?
1. Limited Resources and Finances: Limitations of government resources and limited capacity to meet the infrastructure gap.
2. Need for Different institutional mechanisms: This includes incorporating the spirit of private efficiency into providing services for the public.
3. Equitable risk allocation and mitigation: Shared risk allocation is a principal feature of a PPP project. PPP projects allow sharing of different kinds of risks between the private and public sector.
4. Complementary roles and drivers: Putting it somewhat simplistically, the public sector is predominantly driven by the ‘public good’, the private sector by ‘profit’. PPP projects allow both the sectors to cooperate and make these seemingly contradictory goals work together. As an example, land acquisition and environmental clearances are best obtained by governments, and the private sector can deliver much faster, if such clearances are handled by the government.

1. Service Contract :

• Under a service contract, the Government (public authority) hires a private company or entity to carry out one or more specified tasks or services for a period, typically 1–3 years.
• The public authority remains the primary provider of the infrastructure service and contracts out only portions of its operation to the private partner.
• The private partner must perform the service at the agreed cost and must typically meet performance standards set by the public sector.
• The Government pays the private partner a predetermined fee for the service, which may be a one-time fee, based on unit cost, or some other basis.
• For Example Service Contract to repair the roads

2. Management Contract :

• A management contract expands the services to be contracted out to include some or all of the management and operation of the public service (i.e., utility, hospital, port authority, etc.).
• Although ultimate obligation for service i.e. loss and profits remains in the public sector, daily management control and authority is assigned to the private partner or contractor. In most cases, the private partner provides working capital but no financing for investment.
• The private contractor is paid a predetermined rate for labor and other anticipated operating costs.
• In service contact only a particular service is contracted but in management contract the full operational and maintenance activities are contracted.
• For example maintenance contract would be to manage a hospital from operational and maintenance pespective.

3. Lease Contract :

• Under a lease contract, the private partner is responsible fully
• The duration of the leasing contract is typically for 10 years and may be renewed for up to 20 years.
• Responsibility for service is transferred from the public sector to the private sector and the financial risk for operation and maintenance is borne entirely by the private sector operator.
• In particular, the operator is responsible for losses and for unpaid consumers' debts.
• Assets are owned by Public sector and no capital investment by Private sector
• For example: Govt. may lease out the government hospitals to the private sector to operate them. The entire responsibility of all the operations along with Profit and Loss would be with the Private Sector

4. Concessions :

• A concession makes the private sector operator (concessionaire) responsible for the full delivery of services in a specified area, including operation, maintenance, collection, management, and construction and rehabilitation of the system
• importantly, the operator is now responsible for all capital investment. Although the private sector operator is responsible for providing the assets, such assets are publicly owned even during the concession period
• The public sector is responsible for establishing performance standards and ensuring that the concessionaire meets them. In essence, the public sector’s role shifts from being the service provider to regulating the price and quality of service

5. Build Operate Transfer :

• BOT and similar arrangements are a kind of specialized concession in which a private firm or consortium finances and develops a new infrastructure project or a major component according to performance standards set by the government.
• Under BOTs, the private partner provides the capital required to Build the new facility,
• Importantly, the private operator now owns the assets for a period set by contract— sufficient to allow the developer time to recover investment costs through user charges.
• At the end of the contract, the public sector assumes ownership but can opt to assume operating responsibility, contract the operation responsibility to the developer, or award a new contract to a new partner. The following types of model exists on the same lines, all are discussed below:

Design Build (DB): Under this model, the government contracts with a private partner to design and build a facility in accordance with the requirements set by the government. After completing the facility, the ownership is with the government and government assumes responsibility for operating and maintaining the facility. This method of procurement is also referred to as Build-Transfer (BT).

II. Design Build Maintain (DBM): Under this model, the government contracts with a private partner to design and build a facility in accordance with the requirements set by the government. After completing the facility, the ownership is with the government and government assumes responsibility for operating the facility but the responsibility to maintain is given to Private sector.

III. Design Build Operate (DBO): Under this model, the private sector designs and builds a facility. Once the facility is completed, the title for the new facility is transferred to the public sector, while the private sector operates the facility for a specified period. This procurement model is also referred to as Build-Transfer-Operate (BTO).

IV. Design Build Operate Maintain (DBOM): This model combines the responsibilities of design-build procurements with the operations and maintenance of a facility for a specified period by a private sector partner. During this period the ownership remains with the private sector. At the end of that period, the operation of the facility is transferred back to the public sector. This method of procurement is also referred to as Build-Operate-Transfer (BOT).

V. Build Own Operate (BOO): The government grants the right to finance, design, build, operate and maintain a project to a private entity, which retains ownership of the project. The private entity is not required to transfer the facility back to the government.

VI. Design-Build-Finance-Operate/Maintain (DBFO, DBFM or DBFO/M): Under this model, the private sector designs, builds, finances, operates and/or maintains a new facility under a long-term lease. At the end of the lease term, the facility is transferred to the public sector.