Investors in projects of public interest can be from both public and private sector.
The traditional model of financing projects is either from current tax and non-tax revenue, or borrowing. Given that the possibility of borrowing is restricted by law and with approaching the limit of debt finance the cost of debt increases, the increasing cost of funding reduces the favorable balance of quality and cost of public services.
Public sector may decide to build a public facility and independently deliver services as well as independently conduct all phases of project development or it can order individual phases from other sources (private and civil sector).
Private investors have the advantage of a so-called economy of scale and can therefore achieve more favorable project financing, and thus a lower cost of public services. They also possess a significantly larger range of financial instruments and models that can reduce the overall financing costs and create added value.
Investor manages the foreign currency risk and interest rate risk by using the financial instruments. Positive foreign exchange differences mean that the increase in revenue in a currency in relation to the currency funding sources present additional benefits of the project because of additional earnings. Investor can, by using the currency option, transfer the currency risk onto various financial agencies that are ready, for a fee, to take the risk of exchange rate fluctuation of the two currencies and thus protecting profits from currency risk.
Effective management of currency risk makes the process of delivery of public services more efficient which can result in a higher added value in the private delivery of public services rather than traditional delivery of services.
Contractual forms of public private partnerships perceive the costs of managing buildings during a long period of time (25-30 years). Therefore the cost of financing the building for the investor does not finish with the end of construction and completing the building, but on the contrary, with completing and with the beginning of use/maintenance begins a significant portion of the whole life cost of the construction investment project.
Integration of all the stages is defined during by contract (design, financing, construction, maintenance and facility use and eventual demolition and removal of the facility at the end of the building life cycle).
Total PPP project cost is compared to the “comparative costs of the public sector”(PSC – Public Sector Comparator). The contract also defines “specifications of performances” of public buildings and the payment is related to the detailed monitoring and achieving of the determined performances.
Building maintenance must be well planned (planned, preventive, inspection and reactive maintenance).
Without professional and quality awareness and consideration of the matter in question the PPP project can not be realized.