CP3P Core Concepts and Principles 2

Question 1

Which feature most clearly distinguishes a PPP from traditional public procurement?

Accepted Answer

Significant risk and management responsibility are transferred to the private partner over a long-term contract

Answer

PPPs are long-term contracts in which the private party bears significant risk and management responsibility, with payment linked to performance.

Question 2

In an availability-payment PPP, the private partner is paid mainly based on:

Accepted Answer

Making the asset available to the required performance standards

Answer

Availability payments are made by government when the asset meets defined availability and performance standards, with deductions for failures.

Question 3

Under a user-pays (concession) PPP model, which risk is typically borne mainly by the private partner?

Accepted Answer

Demand (traffic/revenue) risk

Answer

In user-pays concessions, the private partner's revenues depend on usage, so it bears demand risk.

Question 4

What is the guiding principle for allocating risk in a PPP?

Accepted Answer

Allocate each risk to the party best able to manage it at least cost

Answer

Optimal risk allocation assigns each risk to the party best able to control or absorb it, which maximizes value for money.

Question 5

Why is a PPP contract usually based on output specifications rather than input specifications?

Accepted Answer

They let the private partner innovate in how it meets required service levels

Answer

Specifying outputs (what must be achieved) rather than inputs (how) gives the private partner freedom to innovate and optimize whole-life cost.

CP3P - Public-Private Partnership Certification Practice Test