Our Views

Public-Private Partnerships (PPPs) are emerging as a strategic tool to deliver defense infrastructure and services globally. By leveraging private investment in defense projects, governments can modernize military facilities and technology while sharing risks and harnessing private-sector efficiencies. Countries from the UK and France to emerging markets are increasingly adopting defense PPPs. This article explores how to structure PPPs in the defense sector, highlighting best practices, partnership models, and key considerations—such as risk allocation, security, procurement, and regulatory frameworks—through a global lens. We also cite real-world examples of successful defense PPPs and discuss how Aninver’s experience can guide such complex projects.

Why Consider Defense Infrastructure PPPs?

Traditional defense procurement relies on public funding and government-managed projects, but defense infrastructure PPPs offer unique benefits. By partnering with the private sector under well-structured agreements, defense authorities can achieve:

• Cost Efficiency: PPPs can deliver projects at lower overall cost by tapping private-sector expertise and innovation. For example, a European Investment Bank study noted that private partners often complete military facilities more efficiently, as seen in France’s CEGELOG military housing program and the UK’s Allenby-Connaught project.
• Focus on Core Missions: With a private partner handling support infrastructure, defense agencies can focus on their core security missions. Non-core activities (construction, facilities management, etc.) are outsourced, freeing up military resources for operational readiness.
• Innovation and Technology: PPPs invite cutting-edge private innovation—from cybersecurity to AI and drones—into defense projects. This accelerates modernization of defense capabilities by integrating new technologies that a traditional procurement might not easily capture.
• On-Time Delivery: Long-term PPP contracts incentivize timely delivery. Payment structures and penalties in PPP agreements mean facilities (from training centers to bases) are more likely to be delivered on schedule, avoiding delays common in military procurement.
• Life-Cycle Maintenance: PPPs typically include operations and maintenance over decades. This life-cycle approach ensures infrastructure (barracks, bases, training academies) is well-maintained long after construction, with performance-linked payments driving quality upkeep. The private partner’s profit is tied to meeting availability and service standards, reducing the risk of facilities falling into disrepair.

Equally important, PPPs can mobilize private capital for defense at a time of constrained budgets. Rather than delaying critical projects, governments can use PPP financing to kick-start base upgrades or equipment facilities, paying back over time. This risk-sharing of investment accelerates defense infrastructure development without straining immediate public finances. In sum, when carefully applied, PPPs in defense combine the strengths of both sectors: the government retains strategic control and security oversight, while the private sector brings efficiency, innovation, and funding.

Structural Models and Risk Allocation in Defense PPPs

Structuring a defense-sector PPP requires choosing the right model and allocating risks optimally. The most common structure globally is akin to a Design–Build–Finance–Operate (DBFO) model, often implemented via long-term concessions or Private Finance Initiative (PFI) contracts. Under a DBFO/PFI arrangement, the government awards a long-term franchise to a private consortium, which finances, builds, and maintains the infrastructure and provides specified services over the contract term. In exchange, the government (and sometimes users) makes payments contingent on performance (e.g. availability payments for military housing or training facilities). Crucially, ownership of strategic assets typically remains with the government, but the private partner’s role spans the asset’s lifecycle.

A hallmark of PPP structuring is the creation of a project company. The private consortium usually forms a special purpose vehicle (SPV) to sign the contract and manage the project. This SPV raises funds (equity from sponsors and debt from lenders), subcontracts construction and operations, and acts as the single point of accountability to the government. For defense PPPs, the SPV structure helps ring-fence the project’s risks and finances, while allowing government to enforce performance through a single contract with the SPV.

Risk allocation is at the heart of PPP structuring. A central principle is that each risk should be allocated to the party best able to manage or mitigate it. In practice, this means the private partner often takes on design and construction risk (since it controls delivering facilities on time and on budget), as well as maintenance and availability risk during operations. For example, if a contractor can better control cost overruns in building a naval training center, those construction cost risks are transferred to them. On the other hand, certain risks remain with the public sector – notably demand risk (e.g. how much a training facility is used) or extreme force majeure events – because the government is better positioned to bear or control those uncertainties. In defense PPPs, usage risk is typically retained by the military (since it dictates how facilities are utilized), and political/security risks (like war or classified information breaches) are inherently governmental. By optimizing risk sharing in this way, PPP contracts align incentives: the private partner is motivated to perform (or face penalties and revenue loss), while the government avoids paying for poor service and ultimately gets better value for money. Overloading the private side with uncontrollable risks is counterproductive – it would drive up costs or deter bidders. Thus, successful defense PPPs strike a balance, transferring substantial project delivery and performance risk to the private sector, but not risks that would imperil the project or raise costs unnecessarily (for instance, a contractor cannot be expected to bear the risk of a military base closure due to a change in national strategy).

Another structural consideration is payment mechanism. Most defense PPPs use availability-based payments rather than direct user fees, since defense facilities (barracks, training schools, HQ buildings) generally don’t generate revenue from users. The government makes periodic payments to the private partner only if the service standards are met – for example, a fixed monthly fee for an army housing complex that is reduced if any accommodation units or utilities are out of service. This incentivizes the partner to keep assets fully functional. Some defense PPP contracts also bundle “soft” services (maintenance, catering, transport) with infrastructure, as seen in many military base deals, further aligning the private partner’s success with quality service delivery.

Security and Regulatory Considerations

When structuring a PPP in defense or security, safeguarding national security and adhering to regulations are paramount. Unlike standard infrastructure projects, defense PPPs deal with sensitive sites and information, so additional precautions are built into contracts and procurement processes.

National security safeguards: Governments commonly require strict confidentiality and security measures from the private partner. For example, in highly sensitive defense PPPs the contracting authority will oblige the private contractors (and even their key personnel) to sign undertakings to comply with national security laws. All parties involved may need security clearances. Contracts include robust non-disclosure agreements (NDAs) and data protection clauses to prevent leakage of classified information. In practice, this means private firms must handle project data on secure IT systems and limit knowledge to cleared individuals. If the PPP involves defense equipment or IT, cybersecurity requirements will be stringent – the partner might have to use vetted technology and allow government IT audits.

Government oversight and control: To address sovereignty concerns, PPP agreements delineate clear boundaries on the private role. The military retains authority over core operations and security decisions, while the private partner’s scope is limited to infrastructure and support services. Many PPP contracts explicitly state that operational command, security protocols, and strategic asset use remain under government control. Governments also build in oversight mechanisms: on-site military liaisons, audit rights, and step-in rights to take over the facility if the contractor fails or in emergency. These ensure that while a private company may maintain an airbase or manage a training center, it does so under the armed forces’ watchful eye.

Local and allied participation: Countries often restrict defense PPP bidding to trusted companies (domestic or from allied nations) to mitigate security risks. For instance, Lithuania’s Ministry of National Defence, when launching a PPP for a new military base, allowed participation only from firms based in the EU or NATO, and subjected all bidders to national security screening. This kind of vetting is a best practice to ensure no hostile entity gains access to sensitive projects. Additionally, many defense contracts mandate a share of work for local firms or require technology transfer to domestic industry. Such provisions not only protect national interests but also build local capacity – aligning with policies like localization (e.g. Saudi Arabia’s Vision 2030 seeks to localize defense spending via private partnerships). By including local content clauses, PPPs can bolster domestic defense industries and preserve sovereignty over critical skills and assets.

Regulatory frameworks: Legally, defense PPPs must navigate both general PPP laws and defense-specific regulations. Most countries have PPP legislation outlining procurement and contract requirements for public projects, and these generally apply to defense projects as well (sometimes with special amendments). Simultaneously, defense procurement laws or national security laws may impose additional steps. For example, procurements might be conducted not as open tenders but via competitive dialogue or limited bidding to allow negotiation of sensitive requirements in a confidential manner. Governments must ensure that PPP contracts comply with defense acquisition policies (covering issues like export controls, classified information handling, and military standards for construction). Engaging early with defense legal authorities and possibly passing enabling legislation (as Poland has done with a dedicated Public-Private Partnership Act alongside public procurement law) helps create a clear framework. Clarity in the regulatory and contractual framework is key to give private investors confidence despite the sector’s complexities. This includes addressing how disputes will be handled (often via arbitration to avoid sensitive info in public courts) and how any change in law or security situation will be managed under the contract.

In summary, defense PPPs can be structured securely by embedding government oversight, restricting access to trusted partners, and aligning with robust legal frameworks. Global experience shows these precautions can successfully protect national interests while still reaping the benefits of private sector participation.

Global Case Studies: PPPs Transforming Defense Infrastructure

A UK soldier returns home to newly built, family-friendly barracks at Tidworth Camp. The UK’s Project Allenby/Connaught is a landmark defense PPP that modernized living and working facilities for 18,700 military personnel across multiple garrisons. Through this 35-year partnership (awarded in 2006 to the Aspire Defence consortium), the private partner financed and rebuilt over 500 buildings—barracks, dining halls, offices, recreational facilities—while also providing services like catering, transport, and maintenance. With a total lifecycle value around £8 billion, Project Allenby/Connaught dramatically improved soldier accommodation (over 11,000 new en-suite bed spaces) and is maintained to high standards through 2041 under the PPP contract. The UK Ministry of Defence pays availability-based fees, incentivizing the contractor to keep facilities in top condition. This PPP has been cited as a success, demonstrating how risk sharing and private capital can upgrade military infrastructure at scale while allowing the Army to concentrate on its core duties.

Another flagship example is France’s Ministry of Defence headquarters project in Paris (the “Balard Hexagon”). Instead of funding and building its sprawling new headquarters through conventional means, the French government signed a 30-year PPP contract in 2011 with a private consortium Opale-Défense (led by Bouygues Construction) to design, finance, construct, and operate the 420,000 m² defense ministry campus. The private partner delivered a state-of-the-art facility uniting all branches of the armed forces in one complex, complete with modern energy-efficient systems and high-security infrastructure. In return, the government pays an annual performance-based fee while the consortium handles maintenance, utilities, and upgrades through 2041. This project (often called France’s “Pentagon”) is a model for controlling public expenditure via PPP in defense – it transferred construction and facilities management risks to the private sector, came in on time, and guarantees the Ministry a high-quality working environment without the headaches of day-to-day facility upkeep. French officials praised the PPP model for modernising critical defense infrastructure in a budget-controlled way.

Beyond Europe, other countries have leveraged PPPs for defense needs. Australia, Canada, and the U.S. have used variants of PPPs for military housing, training facilities, and base utilities. In the United States, the Military Housing Privatization Initiative (MHPI) launched in the late 1990s effectively turned base housing over to public-private partnerships. For example, at Fort Sam Houston (Joint Base San Antonio), the Army partnered with a private real estate firm under a 50-year agreement to own, operate, and upgrade all on-base family housing. The goal of this PPP was to eliminate substandard homes and provide soldiers and families with modern, comfortable residences and amenities. The private partner finances new housing construction and renovation of old units, then manages the properties, while military families pay rent via their housing allowance (which funds the project). The Army retains oversight, but the private sector’s involvement accelerated the replacement of outdated barracks with apartment-style homes, improving quality of life. Today, the vast majority of U.S. military family housing is run by such partnerships – a testament to how private investment in defense communities can address infrastructure backlogs quickly.

Emerging markets are also exploring defense and security PPPs. In Lithuania, as noted, the Ministry of Defence in 2021 signed two PPP contracts to build and maintain military infrastructure over 15 years (each ~€55 million), and in 2023 it initiated procurement for a large €520 million military base via PPP. That base project will deliver a new 80-hectare complex (with housing, training grounds, and even helipads for 1,500 troops) through a private partner, showcasing that even mid-sized nations can use PPPs to expand capacity rapidly. Saudi Arabia too is eyeing PPP models as it modernizes its defense sector – a recent example is a planned 52,000 m² Ministry of Defense office complex in Riyadh to be developed via PPP. This aligns with Saudi Vision 2030 goals to involve private investment in defense infrastructure and technology. These global examples illustrate the versatility of PPP approaches: from accommodation and headquarters to training facilities and logistics, PPPs have been successfully applied to a range of defense projects. The common thread is careful structuring to balance efficiency with security. When done right, private investment in defense infrastructure can deliver timely, cost-effective results, as seen in these cases.

Aninver’s View: Defense PPPs Are About Capability, Not Just Contracts

In defense, a PPP shouldn’t be treated as a financing workaround or a standard procurement exercise. At its best, it’s a capability-building tool: it helps governments deliver secure infrastructure and services while protecting sovereignty, operational readiness, and public value. That requires structuring the partnership around what matters most—mission continuity, trusted supply chains, and clear accountability.

From Aninver’s perspective, the differentiator is governance. Strong defense PPPs translate security needs into measurable performance, define “red lines” that remain under public control, and embed step-in rights, resilience requirements, and rigorous oversight from day one. When risk-sharing is realistic (not optimistic), PPPs can accelerate delivery without compromising security, quality, or long-term affordability.

If you’d like to explore how these principles apply across real projects and sectors, take a look at Aninver’s Projects and Our Views sections. You’ll find related work on complex infrastructure structuring, risk allocation, and long-term asset management—useful reference points for anyone shaping the next generation of defense and security partnerships.