Public‑Private Partnership (PPP) projects have become a well-established model in Europe to develop large-scale infrastructure and public services by combining the resources and capacities of the public and private sectors. A key feature of PPP projects is the allocation or transfer of risks (construction, availability, demand, operation, etc.) to the private partner, depending on their ability to manage them best, within a long-term contractual framework.
Participating in a PPP tender requires strong commitments, both in the award phase and during the project’s execution and operation. In this context, surety insurance can be a highly effective alternative to traditional bank guarantees, offering better liquidity management and financing capacity. The validity and form of the guarantee are always determined by the applicable laws and tender specifications.
What are PPP Projects?
Public-Private Partnerships allow a public authority to entrust a private operator with the design, financing, construction and/or operation of infrastructure or a public service, under a long-term contract with a clear risk-sharing model. Common examples include: highways, airports and railways; hospitals and schools; energy and telecom networks; or water and waste systems.
In practice, PPPs are often structured as concessions or other long-duration contracts, and in the EU are regulated under Directive 2014/23/EU on the award of concession contracts and Directive 2014/24/EU on public procurement (both consolidated as of 01/01/2024). These define a harmonised framework based on the principles of equal treatment, transparency and open competition.
The Role of Surety Insurance in PPP Tenders
To protect public interests against non-compliance, most tenders require guarantees such as a bid bond, performance bond, and in some cases, maintenance or operation guarantees (for the operational phase of the project). The exact type and terms are defined in each tender’s documentation and governed by national law. In this context, surety insurance becomes a strong alternative to traditional bank guarantees.
Advantages of Surety Insurance
- Does not tie up liquidity: It does not require blocked funds in a pledged bank account nor does it consume banking credit lines, as bank guarantees often do.
- Does not appear on Bank Report Risk: In Spain, the Central Bank’s database logs financial risk from loans and guarantees. Surety policies issued by insurance companies are not recorded as banking risk.
- Customised to project lifecycle: Policies can be structured in stages and adapted to project milestones as required by the tender documents.
A Key Instrument to Compete in Large-Scale Projects
As investment grows in sustainable infrastructure, digitalisation and resilience, PPP projects are gaining strategic importance in public spending. At the same time, private companies need financial tools to remain competitive without putting pressure on their balance sheets.
With proven experience in international surety and deep knowledge of the European regulatory framework, Sammy Free helps companies structure efficient guarantees for PPP tenders supporting their expansion and competitiveness across markets.
