Notes

Public-Private Construction Partnership

Jakarta, Indonesia – Many believes that public-private partnerships or P3 can be the long-awaited solution for the construction industry, developing new strategic alliances, improving public services and reducing government costs. This kind of “business” in the construction industry happens when the government partners with private construction companies like Axis Capital Group in creation of public works and highways. Public-private partnerships can be negotiated using different contracting methods producing the projected results allowing a faster benefit to all citizens. Depending on the job being executed Public Private Partnerships will results in greater benefits and will allow the business to develop into an exciting emerging market.

Public Private Partnerships (P3) offer several benefits:

• Public Private Partnerships could increase and provide greater infrastructure solutions.

• It will offer faster project completion and reduced delays on infrastructure projects

• The Public private partnerships return of investment (ROI) is greater when compare to traditional methods, due to innovative design and financing approaches

• Public private partnerships identify the expected life-cycle cost analysis and schedules the operation and maintenance component of the project, programming their cost and expected devaluation

• Risks are weighted from initial conceptual stages to determine the feasibility of a certain project warning both parties on more detailed issues that may come along the way

• The operational and project execution risk is transferred totally to the private sector, leaving the public component on a win-win situation

• P3 allows government funds to be re-directed to other important socio-economic areas thus reducing complaints from citizens on public funds

• Reduces government budget and budget deficits

• High quality standards should be obtained and maintain through expected life-cycle of the project

• Public Private partnership allows a reduce tax payment from users

• Allows the government to direct the expected function of the project in accordance to their own interests

Public Private Partnership Disadvantages

• Every Public private partnership has risks involved, and the government will have to pay the price to transfer those risks to the private sector

• Certain situations can affect the purity of the process due to specialized areas being improved, reducing the number of contractors available to perform the requested projects

• Profits of the projects can vary depending on the assumed risk, competitive level, complexity and volume of the project being performed

• There is a slight risk that the proposed contracting alternative being offered is not the best suited option.

• Government representative must be highly specialized personnel and contracting experts.