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PUBLIC-PRIVATE PARTNERSHIPS

An analysis of public-private partnerships, one of the strategies defined by governments to improve the services they offer through existing or new infrastructure, in conjunction with the private sector.

From Adam Smith to the present day, economic and political theory has dictated that it is the State that should be responsible for satisfying a series of general needs of the inhabitants of its territory, particularly those that are unattractive or difficult for the private sector to meet. This has been substantiated by  the theory of public services and public spending on infrastructure, security and so on.
However, in today’s world,  the use of resources, the detection of needs, innovation, the dizzying speed of events, make the State particularly inefficient in satisfying its inhabitants, which is why it is necessary to involve the private sector in this task. This is precisely why Public Private Partnerships (PPP) were created.
This figure was regulated in our country through Law 1508 of 2012, in which it is defined as follows: “Public Private Partnerships are an instrument of linking private capital, which are materialized in a contract between a state entity and a natural or legal person of private law, for the provision of public goods and their related services, which involves the retention and transfer of risks between the parties and payment mechanisms, related to the availability and level of service of the infrastructure and/or service.”
Since this regulation came into force, the instrument has been used on different occasions in areas such as road infrastructure, education and similar. In some cases it has been successful, in others it has failed. Among the former, it is worth noting that this mechanism is useful for combating corruption, a phenomenon that is undoubtedly the greatest scourge that threatens the country’s socio-economic development.

Some of the characteristics of the PPPs are:

  1. Transfer of risks between the public and private sectors.
  2. Payments associated with availability and service level, which is a rule in the private sector.
  3. No advances are made to the private parties involved (which protects public resources).
  4. Additions limited to 20% of the value of the contract, which seeks to avoid the scandals that the figure has allowed.

It is worth clarifying that Public-Private Partnerships can be proposed by both the public and private sectors, which allows different perspectives on social needs to seek solutions, which is refreshing and in many cases much more efficient. This is why the private sector now has a possibility that it did not have before, that is, to act proactively, to seek the need and invent a solution based on its experience, collaboration and innovation.
PPPs undoubtedly require a multidisciplinary team to be carried out in the correct manner. In this order of ideas, lawyers are a fundamental tool, both for the regulatory and risk analysis that the project will have, as well as for all the other legal instruments necessary for its execution.
Based on the above, we consider that PPPs are a figure that entails a triple gain, since if they are well executed, both the State will win, by fulfilling one of its main functions, as well as the private sector will win, since it will obtain profits and, finally, society (the country) will win, which will continue to move towards the longed-for development.
Author: Santiago Pinzón Sosa.

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