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Ppp Advantages And Disadvantages

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There are several advantages of PPP. One of the main advantages is in terms of the creation of VFM. Under PPP, the SPV will deliver a project at the same quality as under the conventional procurement for less money or a project with the more superior quality for the same amount of money. By optimising the risk allocation i.e. to transfer the risk to the public agency or private sector depending on which party is the best to manage the risk at the least cost, the VFM of the projects can be optimised. The privatization projects manage to reduce the capital expenditure of Malaysia government by RM164 billion (Siddique, 2013). Moreover, the other advantage is in terms of the creation of infrastructures. PPP can enhance the delivery of infrastructures …show more content…

One of the drawbacks is PPP can present the constraints for the public authority as the partnership represents a long term commitment between the public agency and the private sector. Throughout the life cycle of the projects, the government policies might have changed to address the latest needs of the country. Therefore, the changes in the government policies will directly affect the PPP model. The costs for such changes might be difficult to be absorbed into the original project evaluation. On top of that, it poses constraints to renegotiate on the price and contract terms. Thus, every PPP proposal must be evaluated carefully as the estimating and targeting the financial outcomes over long periods are difficult. Given the above constraints, the VFM evaluation could be inaccurate due to the uncertainties of external …show more content…

The complexity may cause difficulty in achieving VFM. Considerations of the VFM will have to be made on the comparison of how much the projects will cost the government for providing infrastructure and services by itself, and the costs of providing the same infrastructure and services through PPP. Moreover, the nature of PPP that involve a long-term concession hinders the flexibility of the government to change any policies relating to the PPP projects in response with the changing environment. For instance, if there are any changes in the policies of education, the government could not shut down a PPP university because they are bonded with the long-term concession period with the private

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