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Subnational Public-Private Partnerships

Meeting Infrastructure Challenges

image of Subnational Public-Private Partnerships

This report focuses on the challenges of governing infrastructure investment and public-private partnerships (PPPs) at the subnational level. Subnational governments – cities and regions – play a vital role in the infrastructure landscape. Infrastructure needs in energy, transport, water and telecommunications are substantial, estimated at USD 6.3 trillion per year between 2016 and 2030. In a tight fiscal environment, it is critical to diversify sources of financing for infrastructure investment and PPPs represent an alternative to traditional government procurement with the potential to improve value for money. However, PPPs are complex and sometimes risky arrangements that require capacity that is not always readily available in government, in particular at the subnational level. This report examines the challenges of using PPPs at the subnational level and ways to address them. It does so by focusing on three case studies: subnational PPPs in France, local Private Finance Initiative (PFI) projects in the United Kingdom, and PPPs in Virginia (United States).

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Public-private partnerships at the subnational level of government: The case of PFI in the United Kingdom

This chapter presents a case study of public-private partnerships (PPPs) for infrastructure development in the United Kingdom (the UK). While PFI is now an historic mechanism, the UK’s history with PFI and the limited attention to the regional and local government experience with PFI in existing literature make the experience at the subnational level particularly worthy of review. The case study explores four areas which can present challenges when implementing subnational public-private partnerships: 1) legal and regulatory arrangements; 2) financing and funding, 3) economies of scale, and 4) local administrative capacity. The case study concludes with a summary of lessons emerging from the UK’s (and particularly England’s) history with PFI at the subnational level.

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