An important organizational form for providing infrastructure services has emerged in recent decades. Known as public-private partnerships or PPPs, this approach is often described as lying somewhere between public provision and privatization. In this book we provide a summary of what, we believe, are the main lessons arising from the interplay between experience and the academic literature on PPPs. What do we know that we did not know 10 or 20 years ago? What are the answers that experience combined with economic analysis provide to the question of choosing between PPPs and public provision? What is the best approach to design a PPP contract?

Until recently, infrastructure facilities such as highways, bridges, airports, schools, and jails were considered public goods. As such, they were built by governments, financed with taxes, and managed by public agencies. In the late 1980s, several countries began using PPPs. A PPP bundles finance, construction, and operation into a single long-term contract between the procurement authority and a private firm. During the life of the contract, the firm receives a stream of revenues as compensation for the initial investment, the operational costs, and the maintenance expenses. Depending on the contract, the stream of revenues may consist of user fees, payments from the procuring authority, or a combination of both. At the end of the contract, the assets revert to the government.