(a)        Conventional procurement

Under a conventional procurement, the government would have taken responsibility for separately procuring and integrating the various elements of works and services required to develop and operate a new facility. Some of these tasks would be carried out in-house, but in some cases government authorities may have begun to lose or outsource many of their in-house capabilities, such as their design team. This increases the integration risk on the government as it makes it more difficult to manage the interfaces between the contracts. The government would also be reliant upon the availability of an adequate budget to be able to carry out these tasks. Restrictions on public sector borrowing may prevent large capital outlays for major projects, so this may slow down the delivery timetable.

In recent years, conventional procurement has made a comeback in the UK for “mega-projects”, too big to privately finance, such as Crossrail in London (£15bn) and High-Speed 2 rail line (>£40bn). In these cases the government has sought to address the interface management risk by “upskilling” itself, namely by taking on one or more “development partners” – these are engineering companies who effectively second a long-term team into the client and who are incentivised to manage the delivery of the project to achieve price and timeliness outcomes.

(a)        PPP procurement

Under a typical PPP project, the private sector (in the diagram below termed “PPP Co”) enters into a long term contract with the government to provide all aspects of the project lifecycle – design, build, financing, operation and maintenance, providing “single point responsibility”.

The dotted arrow at the top represents the fact that while the completion of the design is managed by the private sector, the government retains the responsibility for determining the outline design – the output specification that it wishes the private sector to achieve. However the detail of how this output is achieved is usually left to the private sector.