Enhancing public-private partnership efficiency by using life cycle contracts: a conceptual approach

Abstract

Abstract Public-private partnership is a popular form of cooperation between the state and private operators. Thanks to this cooperation both parties can achieve their goals. The state attracts investments into capital-requiring projects while private companies get stable long-term cash flows and good rate of return in combination with law risks. However, being a form of cooperation of two parties, public-private partnership depends on the quality of organization of this cooperation. This paper presents an overview of public-private partnership and highlights its advantages for the state, business and the end user. Further, it presents an analysis of the life cycle contract system and identifies the disadvantages of this form of interaction. The authors propose to modernize the system of life cycle contracts through the concept of total cost of ownership. The nature of this concept is explained, its advantages and shortcomings are discussed. The paper provides practical examples and research that substantiate the authors' opinion.