Overview of PPP modal variants

The main PPP modal families

Different PPP modes can be compared on a spectrum ranging between low and high levels of private participation and involvement. The four major “families” of PPP modes are:

Management contracts
Lease contracts
Concessions and Build-operate-transfer (BOT) and its variants

PPPs have given rise to an array of acronyms for the names that describe the variations in each modal family. A quick reference of the major PPP acronyms is provided in the Tools module. The main ones are also described in the table below.

Following this, the typical modes and characteristics for the Roads sector are given.

Characteristics of major PPP modal families and their main variants

MODES / FEATURES	Asset ownership during contract	PPP duration	Capital investment focus & responsibility	Private partner revenue risk and compensation terms	Private partner roles	Features, relevance in India & examples
Management Contracts	Contractual arrangement for the management of a part or whole of a public facility or service by the private sector. Capital investment is typically not the primary focus in such arrangements.
Note: service contracts and management contracts of less than 3 years duration are not included in the definition of PPP in India.
Management Contract	Public	Short – medium (e.g. 3-5yrs)	Not the focus Public	Low (Pre-determined fee, possibly with performance incentives)	Management of all aspects of operation and maintenance.	This involves contracting to the private sector most or all of the operations and maintenance of a public facility or service. Although the ultimate obligation of service provision remains with the public authority, the day-to-day management control is vested with the private sector. Usually the private sector is not required to make capital investments. These are prevalent in India across sectors. e.g., Karnataka Urban Water Supply and Improvement Project, performance based maintenance contracts in highways.
Management Contract (with rehabilitation/ expansion )	Public	Medium – long	Limited Focus Brownfield (Rehabilitation / expansion) Private	Medium (Tariff / Revenue share)	Minimum Capex, Management, Maintenance	This is similar to management contracts but include limited investments for rehabilitation or expansion of the facility. This mode has been adopted in the power distribution and water supply sectors e.g. Bhiwandi Distribution Franchise, Latur Water Supply Project.
Lease Contracts	Asset is leased, either by the public entity to the private partner or vice-versa.
Lease	Public	Medium (e.g., 10-15yrs)	Not the focus Public	High Revenue from Operations	Management and maintenance	e.g. Leasing of retail outlets at railway stations by Indian Railways
Build Lease Transfer (BLT) or Build-Own-Lease-Transfer (BOLT)	Private (Leased to the government)	Medium (e.g. 10-15yrs)	Greenfield Private	Low-medium Pre-set lease from the government.	Capex	Involves building a facility, leasing it to the Govt. and transferring the facility after recovery of investment. Primarily taken up for railway projects such as gauge conversion in India in the past, with limited success.
Build-Transfer-Lease (BTL)	Public	Medium (e.g., 10-15yrs)	Greenfield Private	High Revenue from User Charges	Capex and Operations	Involves building an asset, transferring it to the Govt, and leasing it back. Here the private sector delivers the service and collects user charges.
Concessions	Responsibility for construction (typically brownfield / expansions) and operations with the private partner while ownership is retained by the public sector.
Area Concessions	Public	Long (e.g. 20-30 yrs)	Brownfield/ Expansions Private	High Tariff revenue	Design, finance, construct, manage, maintain	Herein the private sector (concessionaire) is 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 while the assets are publicly owned even during the concession period. The public sector’s role shifts from being the service provider to regulating the price and quality of service. For example, water distribution concession for a city or area within the city.
Build-Operate-Transfer Contracts	Responsibility for construction (typically greenfield) and operations with the private partner while ownership is retained by the public sector.
Design-build-operate (DBO)	Public	Short-medium (e.g. 3-5 yrs)	Greenfield Public	Medium-High Tariff revenue	Design, construct, manage, maintain	Not very common in India. Typically financing obligation is not retained by the public sector.
Build-operate-transfer (BOT)/ Design-Build-Finance-Operate-Transfer (DBFOT)	Public	Long (e.g. 20-30 yrs)	Greenfield Private	High Tariff revenue	Design, finance, construct, manage, maintain	Most common form of BOT concession in India. e.g. Nhava Sheva International Container Terminal, Amritsar Interstate Bus Terminal, Delhi Gurgaon Expressway, Hyderabad Metro, Salt Lake Water Supply and Sewage Disposal System.
Build-operate-transfer (BOT) Annuity	Public	Long (e.g. 20-30 yrs)	Greenfield Private	Low Annuity revenue / unitary charge	Design, finance, construct, manage, maintain	This has been adopted for NHAI highway projects in the past. More recently, it is the preferred approach for socially relevant projects where revenue potential is limited. e.g. Tuni Anakapalli Project, Alandur Underground Sewerage Project
Build-own-operate Transfer (BOOT) Contracts	Private partner has the responsibility for construction and operations. Ownership is with the private partner for the duration of the concession.
Build-own-operate-transfer (BOOT) or DBOOT	Private	Long (e.g. 20-30 yrs)	Greenfield Private	High Tariff revenue	Design, construct, own, manage, maintain, transfer	Most common form of BOOT concession in India. For example, Greenfield minor port concessions in Gujarat are on a BOOT basis.
Build-own-operate (BOO)	Private	Perpetual	Greenfield Private	High Tariff revenue	Design, finance, construct, own, manage, maintain	Under this structure the asset ownership is with the private sector and the service / facility provision responsibility is also with the private sector. Not common in India.

The characteristics in the tables are meant to be indicative of the typical differences between the modes. Further variations on each mode and blends of modes are possible and common. It is also likely that new variations will be developed as the PPP market in India evolves.

Sector specific PPP modal characteristics

Roads sector
The PPP mode for roads sector projects in India is affected by the following major characteristics of the sector:

Ownership of land for roads is public in India. Private ownership is not allowed under India law
The private sector roles can cover a broad spectrum from design and finance through construction, operation, revenue collection and management of the facility.
Roads projects that do not involve major capital investment (ie, are O&M only) are typically carried out as performance-based maintenance contracts
Capital projects are of two types: new build (Greenfield) or expansion or addition to existing roads (Brownfield)
Capital projects are typically carried out as BOTs
BOT contracts have a long duration to match the lifetime of the assets created
An important defining feature of a roads BOT is the revenue type. This can be:
- user charges collected by the contractor (toll),
- an annuity paid by the public partner, or
- an indirect user charge that is paid by the public sector rather than being collected from users (shadow toll).

The main roads sector PPP modes and their characteristics are summarised in the table below.

Characteristics of typical PPP modes in the roads sector

MODES / FEATURES	Asset ownership during the contract	PPP duration	Capital investment focus & responsibility	Private partner revenue risk and compensation terms	Private partner roles
Build-operate-transfer (BOT) Toll	Public	Long (e.g. 15-30 yrs)	Brownfield or Greenfield Private	High Toll revenue	Design, finance, construct, manage, maintain and collect tolls
Build-operate-transfer (BOT) Annuity	Public	Long (e.g. 15-30 yrs )	Brownfield or Greenfield Private	Low Annuity revenue / unitary charge	Design, finance, construct, manage, maintain
Build-operate-transfer (BOT) Shadow Toll	Public	Long (e.g. 15-30 yrs )	Brownfield or Greenfield Private	High Shadow Toll revenue	Design, finance, construct, manage, maintain
Performance based Maintenance Contracts	Public	Medium (e.g. 5yrs)	Not the focus Public	Low Pre-determined fee, based on performance	Management of all aspects of operation and maintenance.

PPP family indicator
There are relatively few possible variations in the PPP families for roads. For Capex projects (involving capital expenditure for the construction of new or expanded roads) the key characteristic that distinguishes different PPPs from each other is the choice of revenue source. This is effectively the allocation of revenue risk in the project, which depends on traffic volumes.

The family indicator allows one to quickly see the main choices that define a PPP mode for roads. It shows how the modes change when different choices are made. A screen shot is shown below. The PPP family indicator is available from the Tools module.

Next Page: Risk allocations under different PPP modes