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A consortium is defined as an agreement of more than one individual, governments, organizations, companies, (may be a combination of all the above entities) who have a planned common goal of being involved in an activity where they pool together their resources in order to attain that goal. An example of the consortiums that have taken place and were funded by private and public financial institutions is the Air Bus industry which is one of the world's main manufacturers of civilian planes.
The airbus is owned now by EADS which is a merger of Construcciones Aeronáuticas of Spain, Daimler-Chrysler Aerospace of Germany and Aérospatiale-Matra of France. The status of Airbus as a consortium means that profits are shared to the partner companies representatively based on their interests. Work load is divided on the same basis as that used to divide profits. Another example of a consortium is where a group of banks come together to give a loan which is also known as a syndicate loan.
The private public partnership involves a agreement between the private party and public-sector authority, where private party gives a public service and incurs substantial operational, technical and financial risk in a project. In other types of public private partnership, the cost of the service is given to the consumer of the service and not the taxpayer. In other forms (especially the private finance), capital investment incurred by the private sector on the basis of contract with the government to give services the cost is borne in part or wholly or by the government.
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Government may contribute to private public partnership in kind (for example the transfer of existing physical assets). For the projects which are geared towards at creation of public goods for example the infrastructure department, government can give capital subsidy in the form of a grant, hence making it more attractive to private investors. In some situations, the government can support a project through the provision of revenue subsidies, such as tax breaks or through the provision of annual revenues which are guaranteed for a fixed duration.
Basically, a private-sector consortium brings about a special named company known as a "special purpose vehicle" (SPV) which operate, maintain, build and develop an asset for the period to which it has been contracted. In situations where the government invest in a project, it is mostly (but not compulsory) given an equity share in the "special purpose vehicle" SPV. The consortium is composed of bank lender(s), maintenance company and building contractors. It is the role of the SPV to sign the contracts of agreement with the government and subcontractors to construct and maintain the facility.
In the infrastructure department, they arrange complex contracts that ensure that they are secure and guaranteed the cash flows and make private public partnership projects their major target for project financing. A typical private public partnership example is hospital buildings constructed and financed through the private developers and finally leased to the authority in the hospitals. The private developer hence acts in the position of a landlord by providing medical services and other services such as house keeping where as the hospital provides medical services to patients.
From the start of the financial crisis during the previous year, estimates predict that the amount of private public partnership deals has fallen by nearly thirty percent. These has put significant pressure on governments that do rely on private public partnership as an vital means for the completion of long-term assets, infrastructure and other related services. In addition, this has taken place at a time when public-sector investments on infrastructure are seen as a significant way of maintaining and creating economic activity in the period of the crisis. Due to the importance of private public partnership to the economic activity there has been established various centers to support the capacity of the public-sector to implement projects and share solutions to the problems common in all countries.
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