What is the difference between a concession and a PPP?
A public-private partnership is any long contract in which a private company delivers public infrastructure. A concession is the kind where the company is paid by users and carries the risk that too few of them show up.
In a public-private partnership a company finances, builds and operates a road, hospital or water plant for 20 or 30 years, then hands it back. The government avoids paying the construction bill up front. The company expects to earn it back with a return.
How the company is paid is what separates the models. In a concession it collects from users, through tolls, tariffs or fees. If traffic is lower than forecast, the company loses. In an availability-payment PPP the government pays a fixed amount as long as the asset is open and maintained, so the company carries construction and maintenance risk but not demand risk.
You will also meet the abbreviation BOT, build-operate-transfer, which describes the life cycle and can apply to either model. When a government announces a PPP programme, the useful question is who pays if demand disappoints.
- Concession
- Paid by users. Company bears demand risk
- Availability PPP
- Paid by government. Company bears performance risk
Explainers describe how things generally work. They are not advice for a specific project or country. See our editorial policy.