Ppp Projects In London Transport Construction Essay

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The study about PPPs structure and analysis on financial methodology of public and private partnerships are the main focus of the research. After an initial research it has been understood that scholars looked from different perspectives of project success issues. They came up with number of solutions for that arisen funding issue in the structure of the PPPs projects.

In this paper alternatives for funding public transport projects are analysed and the importance of both parties financial objectives defined by comparing previous works in the filed. Further research is expected to explore more about these alternatives and their implication difficulties.


"Successful public-private partnerships enable both parties to do what they do best to achieve a common goal. In the end, it is as much about open honest communication as it is about money. "

(Eugene A. Schiller, 1999)

"This groundbreaking initiative expanded the transportation pie without raising taxes. It has allowed us to speed up completion of vital road projects and, in many cases, has freed up money to address other transportation needs."

(George Allen, 1999)

"PPPs Infrastructure offers significant investment opportunities for long-term investors, even in a time of global crisis"

(Ngozi N. Okonjo-Iweala, 2008)

Public Private Partnerships (PPPs) are important to the project success of organisations and the role of such partnership dedicated to the management of project has been a glamorous one, yet not they only become effective mechanism for public sector but also they have been cost-efficient mechanism for public projects. But is it only the alternative for funding public transport projects? This study is going to analyse the other financial mechanisms from different aspects, which could be used for public transport projects in the UK.


The provision of high quality transport infrastructure and an appropriate number of reliable transport services is one of the crucial issues governments facing around the world. Transport is critical for economy and benefit of efficient transport supports the economic growth. However, public authorities need to balance financial and strategic interests within limited funding for long term PPP transport projects. Although, public sector needs to revise its political choices and financial methodologies for the critical public transport projects according to changes in today's the investment capital. Therefore, issues about financial mechanisms used in PPPs transport projects are worth to investigate.


Public private partnerships are becoming crucial for today's public projects. PPPs promises value for money and they can deliver the projects on time and within the budget. There is a significant change in the number of successful public projects with government's PPPs approach in recent years. Private Finance Initiative (PFI) is one of the most common forms of PPPs among national and regional governments. PFI is a system that private sector provides capital assets for public services in the UK and this enables the government to spread the great cost of the project investment over a long period of time.

PFI is used for number of large scale infrastructure projects but not all of these projects are always successful. Especially when we look at recent public transport projects, which failed to meet financial objectives and cost millions of pounds to public sector, such as Jubilee Line extension project. The issue behind the financial aspect of the public transport projects effects the government and majority of the project failures creates a big hole in all the tax-payers too. Therefore, in this paper the alternative financial mechanisms will be analysed to find the best option according to financial objectives of PPPs in public transport projects.


This paper aims to identify the conceptual problems which are related with financial objective differences in PPPs and impacts on the success of the transport projects. PPPs financial objectives and mechanisms are looked from different angles. The review of different approaches indicates that there is no perfect mechanism which works best for transport projects as the expectations from the projects it changes.

Numbers of issues have been identified related to public and private sector objective and policy design of the organisations according to previous studies, although the objective of this study is to identify the most effective financial mechanism to solve the issues.

The overall objectives of this paper are to investigate and explain the problems about current public transport projects in London. Moreover, to offer acceptable argument that based on the analysis in the field and how would the public sector benefit from the methodical issues.

In order to achieve desired benefits from the structure of the PPPs projects, the financial investment process of these projects needs to be taken forward and revised again by public sector.


There are two main hypotheses of the study, as

H1: Long-term PPPs project contracts impact the government budgetary system.

H2: An alternative financial mechanism Bond Issue is more suitable for PPPs transport projects.


PPPs were established in the 1990s and over the past 20 years in particular they have been subject to heavy criticism but there has been a move in recent decades for many government functions to be delivered through public private partnerships with a narrow range of objectives so as to increase focus, accountability and effectiveness.

While some research has focused only on the benefits and advantages of PPPs for public sector, other work has sought to show how this partnership impacts and reduces the chances for other financial alternatives for public sector. Accordingly, Consideration of Business Industry report in 2007, PPPs offer value for money, service improvements and a better chance of delivering projects on time and on budget. They are not new, but recent years have seen dramatic increases in the number of governments moving forward with PPPs, and the forms of PPP in use across the globe.

Much of the earlier studies emphasized the issues of PPPs for public sector. Glaister (2000) suggests that the consideration of an alternative financing mechanism is important which the public sector could use to raise reinvestment capitals. Thus, he argued that options are to use conventional public financing, procurement and management or bond mechanism; still another would be full privatisation of the public transport system. He also mentioned important points about benefit of PFI/PPPs in his finding but he heavily criticised the state of the financial function of PPPs for public transport projects by giving the Channel Tunnel Rail Link project experience. In concluding that the PPP is not the only way forward and there are still other opportunities to deliver a cheaper, more democratic alternative for public projects. While there are obvious problems with Glaister's search- he hasn't mentioned any implication methods and implication difficulties of these alternative approaches for public transport projects except PFI/PPP and bond mechanisms in his analysis.

Some studies, however, have taken a different approach by looking not just at financial methods of funding projects as at how the both parties share the risks, resources and risks which are related with the procurement of the projects. In a typical study of this type, Klijn and Teisman (2000 and 2005) emphasised risk-sharing as a necessary fundamental. Public and private are both have to share part of the risks involved in projects in this partnership. Another approach, Commission on UK Public Private Partnerships (2001), described this partnership as a sustainable cooperation which PPPs share not just risks also profits and costs of the projects.

Some definitions of PPP stress the financial relations between both parts. PPP provide better value for money in the provision of public infrastructure and they also reduces pressure on government budgets by using private finance for infrastructures. These uses of PPPs are prominent in the literatures on infrastructure building. This mostly include BOT (Build-Operate-Transfer), BOOT (Build-Own-Operate-Transfer) and BOO (Build-Own-Operate). In general the financial arrangements of BOT, the most common of these arrangements, are the project is designed and financed by the private sector, and run and maintained by the private sector for the concession period. The private sector partner receives income from running the infrastructure (e.g.toll road, electricity generation). After the expiry of the concession period, the legal ownership of the project is transferred to the government. Campbell (2001) suggests a definition of PPP focusing on financial arrangements that is 'a PPP project generally involves the design, construction, financing and maintenance and in some cases operation of public infrastructure or a public facility by the private sector under a long term contract'. (For more definitions, see Blondal 2005, p.19; Webb and Pulle 2002;Savas 2000, & Evans 2003).

The literature has demonstrated different studies regarding financial objectives and the extent of their adoption by public and private bodies in PPPs projects. This study now assesses the financial mechanism which works the best for in particularly London transport projects.


Primary and secondary data will be collected for achieving the objectives of the research. It is because of the limitation to reach a large number of the sampling for this research secondary data will be used. By doing that quantitative data will be collected from other organisations and previous researches.

One of the aims of the research to obtain relevant information about PPPs transport projects therefore, interviews will be set up with transport project professional. The researcher decided on interviewing 10% of the London Transport management team, one from each management team, although this was seen achievable and realistic within the time frame.

Semi-structured interviews were preferred as a method for obtaining the views of the management stuff because it was easier to arrange interviews with the stuff to get clear answers from the candidates. The stuff will be contacted by phone to arrange convenient the interviews. Due to issues of busy project times and work commitments of the stuff all interviews will be carried out during the free time of the candidates. Each interview will be last 20 minutes with a questioner including 10 questions related the issue.

Both techniques will allow the researcher to plan the research and get clear answers from the candidates which will help to figure the issues about projects.

Also, number of London public transport will be analysed to get better understanding of the current situation about PPPs projects, such as Jubilee Line extension and Cross Rail projects.


Primary data based studies in this field are subject to some limitations that can impact upon the results which can linked to the conclusions of the work. Limitations in this research the high rate of negative responses to interviews, which causes confusions in the research conclusions. The issue of low response rate is the important factor.

Furthermore, the interviews will only be held with those organisations management departments; small number of candidates views do not indicate how the project failed because it is deem irrelevant. Furthermore the study was restricted by regional area. The result of such limitations is that more general conclusions should be made with caution.

Accepting these limitations, it is expected that this study will lighten up the debate surrounding the role of PPPs in public transport projects, with particular reference to its role in financial objective differences. This is because it will be expected to address the critical issues of the UK government's PPPs strategy by research into transport area. It is hoped that this research will achieve its objectives so that the research can bring up a new perspective to PPPs inn the UK.


Chapter Two introduces PPPs and their impacts on public transport projects before considering the function as view of the academic literature about PPPs. This will outline how the challenges to its validity and how previous projects have resulted in the content of financial terms. This concern with status as a theme of public private partnership is traced through the principal works of the past 20 years to the identification of financial change as a factor of the PPPs role in projects. The nature of this new component is then contrasted with the views expressed by authors working in the field. Having established the current situation of the function of PPPs,

Chapter Three is going to include the survey results and methodology and Chapter Four presents a report of key findings. Chapter Five has three sections. The first examines that the PPPs from the public objectives perspective and a need for change, also considerations about the ability to change as an important need in their continuing success. In light of this, the second part private sector objectives will be analysed and will be examined how effective the public transport project by undertaking a spectrum of change activities. In the final part of Chapter Five, the findings which have arisen from the results of the search will be compared with the literature surveyed in Chapter Two. This informs the identification of a new approach for public projects.

Chapter Six forms a review of the key ideas outlined here, their practical application, and a look towards how this research could be developed. This includes a brief consideration of how this study is limited and how such issues could be improved upon in subsequent work.


The researches have identified number of gaps in defining different issues of

Public Private Partnership projects from different approaches. Focused on those identified issues in this subject the paper addresses important points, which taught to be helpful to overcome policy design, management and governance problems related to PPPs. The following suggestions which emerge in defining PPPs are:

1. There might be several methodologies of implementing effective PPPs which are relating to policy design, management and governance. For example, the Bond issuing and full privatising.

2. The common features such as nature of cooperation, inter-organisational

agreements, financial concepts and commitment should be very precise that can help to both parties for putting significant lines to their financial objectives.


Literature Review Analyse










Surveys and Data Collecting








Analyses on Data and Finalising









Completion of the Dissertation