Editing Public–private partnership (section)

=== Special purpose vehicle ===
[[File:Mario_Cuomo_Bridge_Overhead.jpg|thumb|One year after the completion of the [[Mario cuomo bridge|Mario Cuomo Bridge]] PPP, dozens of bolts holding its steel girders together had already failed. A whistleblower claims that the SPV responsible for its construction had knowingly delivered many defective high-strength bolts, and taken measures to hide evidence of the defects.<ref name="WRGB 2021">{{cite web|date=March 28, 2021|title=Unsealed records allege a cover up of safety concerns on Gov. Mario M. Cuomo Bridge|url=https://cbs6albany.com/news/local/unsealed-records-allege-a-cover-up-of-safety-concerns-on-gov-mario-m-cuomo-bridge|access-date=August 16, 2021|website=WRGB}}</ref>]]
Typically, a private-sector consortium forms a special company called a [[special purpose vehicle|special-purpose vehicle]] (SPV) to develop, build, maintain, and operate the asset for the contracted period.<ref name="pmid23297282">{{cite journal | last1 = Barlow | first1 = J. | last2 = Roehrich | first2 = J.K. | last3 = Wright | first3 = S. | year = 2013 | title = Europe Sees Mixed Results From Public-Private Partnerships For Building And Managing Health Care Facilities And Services | url =http://spiral.imperial.ac.uk/bitstream/10044/1/15645/2/Health%20Affairs_32_1_2013.pdf | journal = Health Affairs | volume = 32 | issue = 1| pages = 146–154 | pmid = 23297282 | doi=10.1377/hlthaff.2011.1223| hdl = 10044/1/15645 | s2cid = 36377771 }}</ref><ref>{{cite journal | last1 = Zheng | first1 = J. | last2 = Roehrich | first2 = J.K. | last3 = Lewis | first3 = M.A. | year = 2008 | title = The dynamics of contractual and relational governance: Evidence from long-term public–private procurement arrangements | url = https://www.scopus.com/record/display.url?eid=2-s2.0-41049112855&origin=inward&txGid=yXIvJQ7AsPq0YyDQfJmJLCa%3a2 | journal = Journal of Purchasing and Supply Management | volume = 14 | issue = 1| pages = 43–54 | doi=10.1016/j.pursup.2008.01.004| s2cid = 207472262 }}</ref> In cases where the government has invested in the project, it is typically (but not always) allotted an [[Ownership equity|equity]] share in the SPV.<ref>[https://ssrn.com/abstract=1087179 Moszoro M., Gasiorowski P. (2008), 'Optimal Capital Structure of Public–Private Partnerships', IMF Working Paper 1/2008]. Papers.ssrn.com (2008-01-25). Retrieved on 2011-11-20.</ref> The consortium is usually made up of a building contractor, a maintenance company, and one or more equity investors. The two former are typically equity holders in the project, who make decisions but are only repaid when the debts are paid, while the latter is the project's creditor (debt holder).<ref name=":0" />

It is the SPV that signs the contract with the government and with subcontractors to build the facility and then maintain it. A typical PPP example would be a hospital building financed and constructed by a private developer and then leased to the hospital authority. The private developer then acts as landlord, providing housekeeping and other non-medical services, while the hospital itself provides medical services.<ref name="pmid23297282" />

The SPV links the firms responsible of the building phase and the operating phase together. Hence there is a strong incentives in the building stage to make investments with regard to the operating stage. These investments can be desirable but may also be undesirable (e.g., when the investments not only reduce operating costs but also reduce service quality).<ref>{{Cite journal|last=Hart|first=Oliver|date=2003|title=Incomplete Contracts and Public Ownership: Remarks, and an Application to Public–Private Partnerships*|url=http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp61.pdf|journal=The Economic Journal|language=en|volume=113|issue=486|pages=C69–C76|doi=10.1111/1468-0297.00119|issn=1468-0297}}</ref>