7 - What is a PPP?

[Speaker 1] 11-2. Do you give up or do you want to keep on going?
[Speaker 2] Oh, no, no. I’m just distracted. I took out a loan from the bank to do some home improvements, and I'm getting a bit fed up waiting for the quotes from the plumber, the electrician and all the other tradesmen.
[Speaker 1] Well, you know, that's why at state level, local authorities set up PPPs with private companies for their big projects, and we finance those PPPs.
[Speaker 2] Really? And PPPs are?
[Speaker 1] Public-Private Partnerships.
[Speaker 2] Oh! Can I do that?
[Speaker 1] No. It's only for big public-sector projects, like building a high-speed train line, a fiber optic network, a university…
[Speaker 2] Of course.
[Speaker 1] Get it? 
[Speaker 2] Yeah. 
[Speaker 1] A PPP is a contract by which the public sector enters into a business relationship with a private sector to build, finance, maintain, oversee and run a project. Depending on the sector, PPPs can be with companies in construction, public transport, telecoms and the environment companies that are also the bank's biggest clients.
[Speaker 2] Right. So if state authority approaches you and says “I need three new schools”, you'll be the ones to finance the PPP?
[Speaker 1] Only if the client wins the request for proposal. When the state decides it wants to have schools build, it can ask for individual quotes for each part of the project, which will take some time, and that's excluding the cost overruns. Or it will launch a PPP tender.
[Speaker 2] Why would it be any faster with the PPP?
[Speaker 1] Because a successful bidder will be a consortium of private companies that can undertake all the construction costs and deadlines under the PPP. The state therefore transfers the risk to the private sector for the construction, the maintenance and upkeep of the facility over 20 or 30 years. With a PPP, pupils were able to go to their new school one school year earlier.
[Speaker 2] Are banks specialized in projects like building high-speed train lines and fiber optic networks?
[Speaker 1] Yes, their financing departments are. The teams are arranged into sectors and have specialist knowledge of the relevant risks. That way the client gets expert advice.
[Speaker 2] But it must cost a fortune to build a high-speed train line. Can the bank manage it on its own?
[Speaker 1] A public interest project like that often costs several billion euros. In that case, the bank will associate with other banks.
[Speaker 2] Of course. 
[Speaker 1] So do you give up?
[Speaker 2] No, let's keep at it. In fact, I'm just thinking that… I should stop by the house and talk to the foreman. Where's the…?