Designing Buildings - User contributions [en]

Building design and construction fees

2020-04-12T14:02:35Z

Hallen508:

= Introduction =

The term ‘fees’ generally refers to payments made by the client to consultants for services under the terms of an agreement. They are generally paid in instalments based on regular dates or at pre-defined stages of completed work. The core consultant team for most building projects will include:

* Architect (see [[Architect%27s_fees|Architect's fees]]).
* Structural engineer.
* Services engineer.

Larger projects may need additional consultants for management and cost control, including:

* Project manager.
* Cost consultant (see 'quantity surveyor’s fees').
* A contractor on management fee contracts.

In addition, specialists may be required depending on the nature of the project, such as legal adviser, landscape designer, interior designer, environmental consultant, access consultant, planning consultant and fire engineer. Other fees will also be payable on most projects, including planning fees and building regulations fees.

= Variability of fees =

Fees are entirely dependent on the nature of the project and the circumstances of the appointment. Large new-build projects may attract lower percentage fees than small works to existing buildings, commercial work may attract lower fees than private residential work, and works to historic or listed buildings may attract higher fees.

Fees charged by consultants vary according to:

* Size of project.
* Type and complexity of project.
* Scope of services. For example, full design and site inspection will attract a higher fee than concept design that is then developed by the contractor.
* Anticipated repeat and/or bespoke elements of the design.
* Location of site and other consultant practices.
* Reputation of practice. For example, a signature architect might charge more than one that is newly qualified.
* Client organisation and track record. This will affect how much support is required and the risk perceived by consultants.
* Conditions of engagement. For example, the requirement for collateral warranties and partnering arrangements.
* Anticipated programme and resources. The outputs in a short or long programme are the same, However, a longer programme prolongs administrative resources required such as attending meetings and responding to requests for information. Thus percentage fees for a longer period will tend to be higher.
* Economic climate of supply and demand. Fees may be lower during recessions and higher during booms.
* Consultant workload.
* Assessment of the competencies of other consultants.

= Historic fee scales =

Professional institutes used to publish recommended fee scales expressed as a percentage of construction costs for a range of different building types. However, legislation aimed at preventing anti-competitive behaviour forced the institutes to abolish these scales, leaving fee negotiation to market forces.

Consequently, bidding for consultancy work has become a free-for-all in a highly competitive market. Some commentators argue that this has driven down fees, however, it has also been suggested that it has driven down standards and led to much design work being transferred from consultants to specialist contractors and suppliers who include design costs in their building agreements. The design co-ordination issues this has caused has had far reaching consequences and supplied the legal profession with a constant flow of disputes about responsibility for [[Disruption_claims_in_construction|disruption]] and delays.

= Fee calculations =

Despite the demise of fee scales, developers are still inclined to use percentages of building costs for early calculation of the likely fees associated with construction. However, they will then generally negotiate fixed price lump-sums, with each consultant wrapping up any early work in the conceptual stages previously paid for on agreed hourly rates. Interim payment of fees is then related to pre-defined stages reached or related to time, for example, monthly payments against a payment schedule based on anticipated resources.

The table below is a very approximate guide based on commercial office developments in the London area, where the fees of the core team of consultants are expressed as percentages against construction costs (excluding contingency allowances and VAT). Clearly, fees on actual projects will vary considerably depending on the nature of the building required, the site, state of the economy and other factors as discussed above.

== Core consultant fees ==

{|
| Construction cost (excl contingencies and VAT)
| Under £1.5m
| £1.5 - £3m
| £3m - £10m
| £10m - £25m
| £25m - £50m
| £50m+
|-
| Architect
| 9%
| 8%
| 7%
| 6%
| 5%
| 4%
|-
| Cost consultant
| 2%
| 2%
| 1.5%
| 1.5%
| 1%
| 1%
|-
| Services engineer
| 2%
| 2%
| 1.5%
| 1.5%
| 1%
| 1%
|-
| Structural engineer
| 2%
| 2%
| 1.8%
| 1.5%
| 1%
| 1%
|-
| Project manager
| n/a
| n/a
| 2%
| 1.5%
| 1.25%
| 1%
|}

== Other fees on an £80m office ==

It is likely that other, more variable fees will also be incurred. These are much more difficult to predict without a detailed understanding of the nature of the project. However, to give a sense of the type of fee that might be payable, indicative figures are presented below based on actual records of costs incurred on an £80m office block development in the City of London.

=== Acquisition fees ===

{|
|width="50%"| Legal (for developer)
|width="50%"| £600,000
|-
| Agent (for developer)
| £45,000
|-
| Legal (for vendor)
| £120,000
|-
| Agent (for vendor)
| £10,000
|-
|
=== TOTAL ===
|
=== £775,000 ===
|}

=== Specialist fees ===

{|
|width="50%"| Survey
|width="50%"| £30,000
|-
| Party wall
| £228,000
|-
| Acoustics
| £62,400
|-
| Site inspector
| £358,000
|-
| Soil investigation
| £67,000
|-
| Landscape design
| £30,000
|-
| Traffic engineer
| £28,000
|-
| Programmer
| £35,000
|-
| Interior designer
| £200,000
|-
| [[Right_to_light|Right of light]]
| £100,000
|-
| Archaeology
| £40,000
|-
| Building regulations
| £100,000
|-
| CDM co-ordinator
| £50,000
|-
| Planning fees
| £40,000
|-
|
=== TOTAL ===
|
=== £1,368,400 ===
|}

=== Letting fees ===

{|
| Agents
| £2,800,000
|-
| Promotion costs
| £3,000,000
|-
| Legal (for developer)
| £400,000
|-
| TOTAL
| £6,200,000
|}

= Quantum meruit (time charging) =

Occasionally, scope cannot be determined or a project involves significant uncertainty. Consultants may then be employed on pre-agreed hourly rates for different categories of staff. Generally, the hourly rate will reflect 2.5 x payroll cost based on a 1,500 working hour year.

= Competitive tendering and value =

Attempting to save money by driving fees down can be a mistake. Fees represent a small part of the whole-life costs of a project, but poor design can have a long lasting and expensive impact.

The relative cost of a typical project is sometimes illustrated using the ratios shown below:

* 0.1 to 0.15 for design costs (ref. OGC [http://webarchive.nationalarchives.gov.uk/20100503135839/http:/www.ogc.gov.uk/documents/CP0067AEGuide7.pdf Achieving Excellence Guide 7 - Whole-Life costing]).
* 1 for construction costs.
* 5 for maintenance and building operating costs during the lifetime of the building.
* 200 for the cost of operating the business during the lifetime of the building.

(Ref. Report of the Royal Academy of Engineering on The long term costs of owning and using buildings (1998)).

However, this has been criticised as misleading, not least because the construction industry accounts for around 7% of GDP, implying a much more significant proportion of business costs than the ratio suggests. Other ratios of construction costs to operational costs to business costs have suggested figures as low as 1:0.6:6 for some types of buildings. However, the usefulness of these ratios is questionable, other than if they are calculated based on actual figures for specific businesses.

= NRM1 =

NRM1: NRM 1 provides guidance on the quantification of building works for the purpose of preparing cost estimates and cost plans. Order of cost estimating and cost planning for capital building work defines the project/design team fee(s) as '...project team and design team consultants’ fees for pre-construction, construction and post-construction related services, other consultants’ fees, fees and charges for intrusive site investigations, specialist support consultants’ fees and main contractor’s fees for the provision of pre-construction services.

See Group element 11: Project/design team fees for an indicative list of project/design team fees.

It suggests that project/design team fees estimate means '...the total estimated cost of all project/design team fees at the estimate base date (i.e. excluding tender inflation and construction inflation).'

[[File:C_link_property_development_for_SMEs.png|link=http://zpr.io/gk2hR]]

= Related articles on Designing Buildings Wiki =

* Appointing consultants.
* Architects fees.
* Base date.
* Charge-out rate.
* Compensation.
* Consideration.
* Construction organisations and strategy.
* Consultant team.
* Contractual obligation.
* Design team.
* Disbursement.
* Hourly rate.
* Invoice.
* Letter of appointment.
* Planning fees.
* Quantity surveyor’s fees.
* Rates.
* Schedule of services.
* Search fees.
* Sub-consultant.
* Winning work.

[[Category:Appointments]] [[Category:Cost_/_business_planning]] [[Category:Procurement]] [[Category:Property_development]]

Breach of contract

2020-01-04T17:02:40Z

Hallen508:

If the one of the parties to a contract fails to perform as required, this may constitute a breach of contract. A breach may entitle the innocent party to make a claim for damages for the losses it has suffered.

If the breach of contract is serious (a material breach), then the innocent party may also consider that it is discharged from any further obligations under the contract.

If the breach is less serious, (a non-material breach, sometimes referred to as a default) the innocent party may make a claim for damages, but may not consider it is discharged from any further obligations under the contract. This prevents the innocent party from excusing their own performance because of a minor breach of just one part of the contract.

This is generally the position on construction contracts, where some works are likely to have been carried out, but one or more may remain undone, incomplete or defective. As building contracts are usually divided up into parts (divisible), and include a series of separate payments, this sort of partial failure would not allow the innocent party to excuse their performance, i.e. a failure in one part will generally only mean that innocent party is not liable to pay for that part. Furthermore, if the works have been substantially performed, then they must pay for them subject to a claim for the parts that have not been performed.

On construction contracts, it is generally in the interests of both parties for the contract to continue and for the works to proceed irrespective of minor problems. Whilst damages for breach of contract may seek to put the innocent party in the position it would have been in had there not been a breach of contract, the delay and disruption caused, for example, by having to appoint a new contractor can far outweigh the difficulties of proceeding, albeit under difficult circumstances.

Construction contracts generally make provisions for the contract to be varied without there being a breach. Variations, extensions of time, claims for loss and expense, liquidated damages, and the defects liability period all provide for the contract to be varied or for problems to be rectified.

Where one party behaves in such a way that it indicates it no longer intends to accept its obligations under the contract, this is considered to be a [[Repudiatory_beach_in_construction_contracts|repudiatory breach]] (or fundamental breach), allowing the innocent party to terminate the contract and to sue for damages. Generally the contract will set out what those breaches are, but they might include:

* Refusal to carry out work.
* Abandoning the site.
* Removing plant from the site.
* Failure to make payments.
* Employing others to carry out the work.
* Failure to allow access to the site.
* Failure to proceed regularly and diligently.
* Failure to remove or rectify defective works.

Where repudiation is considered to have occurred, the innocent party can either affirm that the contract will continue or accept the repudiation and so terminate the contract. In either case, they will have the right to claim damages. Either way, it is important that there is some sort of response, as inaction may be considered to be an affirmation of the contract.

Assessing the seriousness of breaches of contract depends on the particular circumstances and terms of the contract. For example, if a contractor failed to carry out the work to an agreed timetable, this might be considered a relatively minor issue on some projects, whilst on others it could be an extremely serious breach. The innocent party must be careful therefore to establish that there has actually been a material breach before considering that the contract is terminated, otherwise they might find themselves in breach of contract.

This can lead to disputes, where for example, the client refuses to make payment, claiming that the contractor has failed to perform, whereas the contractor contends that they are not performing because the client has refused to make payment.

An anticipatory breach (or anticipatory repudiation) occurs when one of the parties to the contract declares to the other that they do not intend to perform their obligations under the contract.

The contract may also allow termination under other circumstances, such as frustration or insolvency. It may also allow termination for ‘convenience’, but this may leave the terminating party open to significant claims by the other party. See: Termination for more information.

Rescission is a process of returning both parties to the position they would have been in had they not entered into the contract. This might be appropriate for example if there is a serious error in the contract.

The term irremediable breach refers to a situation where there is a defect in the works for which the cost of rectification is unreasonable relative to the nature of the defect. Under these circumstances the contract administrator may issue a certificate of making good defects, with a deduction relative to the amount by with the value of the works has been reduced by the defect.

NB: The Construction Act now gives contractors the right to suspend performance for non-payment.

= Related articles on Designing Buildings Wiki =

* Alternative dispute resolution.
* Breach.
* Causes of construction disputes.
* Civil procedure rules.
* Concurrent delay.
* Consequential losses.
* Construction Act.
* Contract claims.
* Contract negotiation.
* Cooling off period.
* Defects.
* Delay analysis.
* Derogation from grant.
* Dispute resolution boards.
* Extension of time.
* Fair payment practices.
* Frustration.
* Guarantees.
* Injunction.
* Legal action.
* Litigation.
* Liquidated damages.
* Liquidated v unliquidated damages.
* Loss and expense.
* Pre-action protocol for debt claims
* Proprietary information.
* Remoteness.
* Repudiation.
* Subletting.
* Termination.
* Variations.
* [[What_is_a_default%3F|What is a default?]]

[[Category:Client_procedures]] [[Category:Contracts_/_payment]]

PFI vs PPP

2020-01-04T14:51:15Z

Hallen508:

= 1. Private Finance Initiative (PFI) =

A private finance initiative (PFI) is a way of financing public sector projects through the [https://www.investopedia.com/terms/p/private-sector.asp private sector]. PFIs alleviate the government and [https://www.investopedia.com/terms/t/taxpayer.asp taxpayers] of the immediate burden of coming up with the capital for these projects.

Under a private finance initiative, the private company handles the up-front costs instead of the government. The project is then leased to the public, and the government authority makes annual payments to the private company. These contracts are typically given to construction firms and can last as long as 30 years or more.

PFIs are used primarily in the United Kingdom and in Australia. In the United States, PFIs are also called [https://www.investopedia.com/terms/p/public-private-partnerships.asp public-private partnerships].

=== Understanding Private Finance Initiatives (PFIs) ===

Private finance initiatives were first implemented in the United Kingdom in 1992 and became more popular after 1997. They are used to fund major public works projects such as schools, prisons, hospitals, and infrastructure. Instead of funding these projects upfront from taxpayers, private firms are hired to finance, manage, and complete the projects.

Depending on the type of project, PFI contracts typically last 25 to 30 years. It isn't unusual, though, for firms to have contracts that are less than 20 or even more than 40 years. The [https://www.investopedia.com/terms/c/consortium.asp consortium] provides certain services during the period of the contract, which was previously provided by the public sector. The consortium is paid for the work over the course of the contract on a "no service, no fee" performance basis.

Firms make their money back through long-term repayments plus interest from the government. Thus, the government does not have to lay out a large sum of money at once to fund a large project.

Termination procedures are highly complex, as most projects are not able to secure private financing without assurances that the [https://www.investopedia.com/terms/d/debtfinancing.asp debt financing] of the project will be repaid in the case of termination. In most termination cases, the public sector is required to repay the debt and take ownership of the project. In practice, termination is considered only a last resort.

=== Examples of PFI Projects ===

Many of the projects that are the subject of private finance initiatives are infrastructure projects that benefit the public sector. These include highways and roadways, transport projects such as railroads, airports, bridges, and tunnels. Private sector firms may also be contracted to construct water and wastewater facilities, prisons, public schools, arenas, and sports facilities.

=== KEY TAKEAWAYS ===

* A private finance initiative is a way for the public sector to finance projects through the private sector.
* PFIs eliminate the immediate burden of financing projects from governments and taxpayers.
* PFIs eliminate the burden of coming up with the capital for these projects from the government and taxpayers.
* Governments repay private firms over time with interest.
* PFIs are typically used in the U.K. and in Australia. In the United States, they're called public-private partnerships.

=== Advantages of PFIs ===

Governments have traditionally had to raise money on their own in order to fund public [https://www.investopedia.com/articles/markets/080816/can-infrastructure-spending-really-stimulate-economy.asp infrastructure] projects. If they aren't able to find the money, governments may also borrow from the bond market, and then hire and pay contractors to complete the job. This can often be very cumbersome, which is where the PFI comes in.

PFIs are intended to improve on-time project completion and also transfer some of the risks associated with constructing and maintaining these projects from the public sector to the private sector. Financial advisers such as investment banks help manage the bidding, negotiating, and financing processes.

PFIs also improve the relationship between the public and private sector, while providing both long-term advantages. Through this relationship, both sectors can share knowledge and resources.

=== Disadvantages of PFIs ===

A key drawback is that since the repayment terms include [https://www.investopedia.com/articles/01/061301.asp payments plus interest], the burden may end up being transferred to future taxpayers. In addition, the arrangements sometimes include not only construction but ongoing maintenance once the projects are complete, which further increases a project's future cost and tax burden.

=== Criticism of PFIs in the United Kingdom ===

In the United Kingdom in the 2000s, a scandal surrounding PFIs revealed the government was spending significantly more on these projects than they were worth in order to the benefit of the private firms running them and to the taxpayers' detriment. In addition, PFIs have been criticized as an accounting gimmick to reduce the appearance of public-sector borrowing.

= 2. Public-Private Partnerships =

Public-private partnerships involve collaboration between a government agency and a private-sector company that can be used to finance, build, and operate projects, such as public transportation networks, parks, and convention centers. Financing a project through a public-private partnership can allow a project to be completed sooner or make it a possibility in the first place.

=== How Public-Private Partnerships Work ===

A city government, for example, might be heavily indebted and unable to undertake a capital-intensive building project, but a private enterprise might be interested in funding its construction in exchange for receiving the [https://www.investopedia.com/terms/o/operating_profit.asp operating profits] once the project is complete.

Public-private partnerships typically have contract periods of 25 to 30 years or longer. Financing comes partly from the private sector but requires payments from the public sector and/or users over the project's lifetime. The private partner participates in designing, completing, implementing, and funding the project, while the public partner focuses on defining and monitoring compliance with the objectives. Risks are distributed between the public and private partners according to the ability of each to assess, control, and cope with them.

=== KEY TAKEAWAYS ===

* Public-private partnerships allow large-scale government projects, such as roads, bridges, or hospitals, to be completed with private funding.
* These partnerships work well when private sector technology and innovation combine with public sector incentives to complete work on time and within budget.
* Risks for private enterprise include cost overruns, technical defects, and an inability to meet quality standards, while for public partners, agreed-upon usage fees may not be supported by demand—for example, for a toll road or a bridge.

Although public works and services may be paid for through a fee from the public authority's revenue budget, such as with hospital projects, concessions may involve the right to direct users' payments—for example, with toll highways. In cases such as shadow tolls for highways, payments are based on actual usage of the service. When wastewater treatment is involved, payment is made with fees collected from users.

=== Advantages and Disadvantages of Public-Private Partnerships ===

Partnerships between private companies and government provide advantages to both parties. Private-sector technology and innovation, for example, can help provide better public services through improved operational efficiency. The public sector, for its part, provides incentives for the private sector to deliver projects on time and within budget. In addition, creating economic diversification makes the country more competitive in facilitating its infrastructure base and boosting associated construction, equipment, support services, and other businesses.

There are downsides, too. Physical infrastructure, such as roads or railways, involve construction risks. If the product is not delivered on time, exceeds cost estimates, or has technical defects, the private partner typically bears the burden.

In addition, the private partner faces availability risk if it cannot provide the service promised. A company may not meet safety or other relevant quality standards, for example, when running a prison, hospital, or school.

Demand risk occurs when there are fewer users than expected for the service or infrastructure, such as toll roads, bridges, or tunnels. If the public partner agreed to pay a minimum fee no matter the demand, that partner bears the risk.

=== Public-Private Partnership Examples ===

Public-private partnerships are typically found in transport infrastructure such as highways, airports, railroads, bridges, and tunnels. Examples of municipal and environmental infrastructure include water and wastewater facilities. Public service accommodations include school buildings, prisons, student dormitories, and entertainment or sports facilities.

[[Category:Articles_needing_more_work]]

PFI vs PPP

2020-01-04T14:50:20Z

Hallen508: Created page with "= 1. Private Finance Initiative (PFI) = A private finance initiative (PFI) is a way of financing public sector projects through the [https://www.investopedia.com/terms/p/private..."

= 1. Private Finance Initiative (PFI) =

A private finance initiative (PFI) is a way of financing public sector projects through the [https://www.investopedia.com/terms/p/private-sector.asp private sector]. PFIs alleviate the government and [https://www.investopedia.com/terms/t/taxpayer.asp taxpayers] of the immediate burden of coming up with the capital for these projects.

Under a private finance initiative, the private company handles the up-front costs instead of the government. The project is then leased to the public, and the government authority makes annual payments to the private company. These contracts are typically given to construction firms and can last as long as 30 years or more.

PFIs are used primarily in the United Kingdom and in Australia. In the United States, PFIs are also called [https://www.investopedia.com/terms/p/public-private-partnerships.asp public-private partnerships].

=== Understanding Private Finance Initiatives (PFIs) ===

Private finance initiatives were first implemented in the United Kingdom in 1992 and became more popular after 1997. They are used to fund major public works projects such as schools, prisons, hospitals, and infrastructure. Instead of funding these projects upfront from taxpayers, private firms are hired to finance, manage, and complete the projects.

Depending on the type of project, PFI contracts typically last 25 to 30 years. It isn't unusual, though, for firms to have contracts that are less than 20 or even more than 40 years. The [https://www.investopedia.com/terms/c/consortium.asp consortium] provides certain services during the period of the contract, which was previously provided by the public sector. The consortium is paid for the work over the course of the contract on a "no service, no fee" performance basis.

Firms make their money back through long-term repayments plus interest from the government. Thus, the government does not have to lay out a large sum of money at once to fund a large project.

Termination procedures are highly complex, as most projects are not able to secure private financing without assurances that the [https://www.investopedia.com/terms/d/debtfinancing.asp debt financing] of the project will be repaid in the case of termination. In most termination cases, the public sector is required to repay the debt and take ownership of the project. In practice, termination is considered only a last resort.

=== Examples of PFI Projects ===

Many of the projects that are the subject of private finance initiatives are infrastructure projects that benefit the public sector. These include highways and roadways, transport projects such as railroads, airports, bridges, and tunnels. Private sector firms may also be contracted to construct water and wastewater facilities, prisons, public schools, arenas, and sports facilities.

=== KEY TAKEAWAYS ===

* A private finance initiative is a way for the public sector to finance projects through the private sector.
* PFIs eliminate the immediate burden of financing projects from governments and taxpayers.
* PFIs eliminate the burden of coming up with the capital for these projects from the government and taxpayers.
* Governments repay private firms over time with interest.
* PFIs are typically used in the U.K. and in Australia. In the United States, they're called public-private partnerships.

=== Advantages of PFIs ===

Governments have traditionally had to raise money on their own in order to fund public [https://www.investopedia.com/articles/markets/080816/can-infrastructure-spending-really-stimulate-economy.asp infrastructure] projects. If they aren't able to find the money, governments may also borrow from the bond market, and then hire and pay contractors to complete the job. This can often be very cumbersome, which is where the PFI comes in.

PFIs are intended to improve on-time project completion and also transfer some of the risks associated with constructing and maintaining these projects from the public sector to the private sector. Financial advisers such as investment banks help manage the bidding, negotiating, and financing processes.

PFIs also improve the relationship between the public and private sector, while providing both long-term advantages. Through this relationship, both sectors can share knowledge and resources.

=== Disadvantages of PFIs ===

A key drawback is that since the repayment terms include [https://www.investopedia.com/articles/01/061301.asp payments plus interest], the burden may end up being transferred to future taxpayers. In addition, the arrangements sometimes include not only construction but ongoing maintenance once the projects are complete, which further increases a project's future cost and tax burden.

=== Criticism of PFIs in the United Kingdom ===

In the United Kingdom in the 2000s, a scandal surrounding PFIs revealed the government was spending significantly more on these projects than they were worth in order to the benefit of the private firms running them and to the taxpayers' detriment. In addition, PFIs have been criticized as an accounting gimmick to reduce the appearance of public-sector borrowing.

= Public-Private Partnerships =

Public-private partnerships involve collaboration between a government agency and a private-sector company that can be used to finance, build, and operate projects, such as public transportation networks, parks, and convention centers. Financing a project through a public-private partnership can allow a project to be completed sooner or make it a possibility in the first place.

=== How Public-Private Partnerships Work ===

A city government, for example, might be heavily indebted and unable to undertake a capital-intensive building project, but a private enterprise might be interested in funding its construction in exchange for receiving the [https://www.investopedia.com/terms/o/operating_profit.asp operating profits] once the project is complete.

Public-private partnerships typically have contract periods of 25 to 30 years or longer. Financing comes partly from the private sector but requires payments from the public sector and/or users over the project's lifetime. The private partner participates in designing, completing, implementing, and funding the project, while the public partner focuses on defining and monitoring compliance with the objectives. Risks are distributed between the public and private partners according to the ability of each to assess, control, and cope with them.

=== KEY TAKEAWAYS ===

* Public-private partnerships allow large-scale government projects, such as roads, bridges, or hospitals, to be completed with private funding.
* These partnerships work well when private sector technology and innovation combine with public sector incentives to complete work on time and within budget.
* Risks for private enterprise include cost overruns, technical defects, and an inability to meet quality standards, while for public partners, agreed-upon usage fees may not be supported by demand—for example, for a toll road or a bridge.

Although public works and services may be paid for through a fee from the public authority's revenue budget, such as with hospital projects, concessions may involve the right to direct users' payments—for example, with toll highways. In cases such as shadow tolls for highways, payments are based on actual usage of the service. When wastewater treatment is involved, payment is made with fees collected from users.

=== Advantages and Disadvantages of Public-Private Partnerships ===

Partnerships between private companies and government provide advantages to both parties. Private-sector technology and innovation, for example, can help provide better public services through improved operational efficiency. The public sector, for its part, provides incentives for the private sector to deliver projects on time and within budget. In addition, creating economic diversification makes the country more competitive in facilitating its infrastructure base and boosting associated construction, equipment, support services, and other businesses.

There are downsides, too. Physical infrastructure, such as roads or railways, involve construction risks. If the product is not delivered on time, exceeds cost estimates, or has technical defects, the private partner typically bears the burden.

In addition, the private partner faces availability risk if it cannot provide the service promised. A company may not meet safety or other relevant quality standards, for example, when running a prison, hospital, or school.

Demand risk occurs when there are fewer users than expected for the service or infrastructure, such as toll roads, bridges, or tunnels. If the public partner agreed to pay a minimum fee no matter the demand, that partner bears the risk.

=== Public-Private Partnership Examples ===

Public-private partnerships are typically found in transport infrastructure such as highways, airports, railroads, bridges, and tunnels. Examples of municipal and environmental infrastructure include water and wastewater facilities. Public service accommodations include school buildings, prisons, student dormitories, and entertainment or sports facilities.

[[Category:Articles_needing_more_work]]