This is the fourteenth installment in the structural analysis series from the Public Asset Utilization Research Lab (ISVD-LAB-005). It examines how internal capacity — staff expertise, organizational structure, and mayoral engagement — shapes PPP/PFI project formation in Japanese municipalities.
What Is Happening
The single greatest barrier to PPP/PFI project formation is not funding or regulation — it is people. As noted in the third installment of this series (structural analysis of the 9% PFS adoption rate), practitioners consistently identify "whether a motivated staff member exists" as the most decisive variable, outweighing every other factor.
The Cabinet Office has invested heavily in supporting municipalities: PPP desk establishment, expert dispatch programs, and training curricula are all in place. The institutional infrastructure is comprehensive.
Yet despite this, the rate of municipalities that have enacted Priority Review Regulations reached 82% as of the end of March 2025 — while actual project formation remains heavily concentrated in a small subset of municipalities. The gap between regulatory adoption and project generation reveals the real structure of the problem: institutions exist, but projects do not materialize.
Background and Context
How Are Municipal PPP Promotion Frameworks Designed?
Since 2021, the Cabinet Office has developed the PFI Project Introduction Handbook and has encouraged local governments to establish PPP desks. A PPP desk is a cross-departmental consultation hub that consolidates expertise from finance, legal, urban planning, and facility management — enabling coherent dialogue with private-sector operators.
The Priority Review Regulation requires municipalities above a certain scale to prioritize PPP/PFI consideration when planning new public facilities. An 82% adoption rate means the vast majority of municipalities are formally obligated to evaluate PPP/PFI options.
Yet there is an enormous gap between "an obligation to consider" and "the capacity to form a project." That gap is the structural root of the project formation divide.
What Separates Municipalities That Form Projects From Those That Do Not?
Cross-referencing the Ministry of Internal Affairs and Communications' Public Facility Management Plan follow-up survey (share of adopting municipalities that are exploring private-sector utilization) with the Cabinet Office's annual surveys reveals three structural differences that consistently distinguish project-generating municipalities from non-generating ones.
First difference: Staff expertise and continuity
PPP/PFI projects take years to form. Even when dedicated staff exist, personnel rotations can transfer them out mid-process, making handoffs difficult and causing projects to collapse. Municipalities that do generate projects typically have staff who remain in the same post for three to five or more years, or have established a dedicated unit or division.
By contrast, in municipalities where projects never materialize, PPP responsibilities are tacked on to staff with other duties, institutional knowledge stays with individuals, and that knowledge evaporates when people rotate out.
Second difference: Mayoral commitment
Navigating the internal approvals required to advance a project means facing pushback at every stage — from finance, legal, and assembly liaison offices asking "why adopt an unprecedented approach?" Overcoming this resistance requires the mayor to explicitly endorse PPP/PFI as organizational policy and issue direct guidance to each department.
Multiple municipalities have reported that a single statement from a mayor changed the internal atmosphere entirely. The observation that "mayoral commitment is the single most powerful driver" recurs in Cabinet Office materials aimed at practitioners.
Third difference: Accumulated history of dialogue with the private sector
Municipalities that conduct regular sounding exercises (government–private dialogue sessions) build up intelligence on which facilities are attractive to private operators and which contract conditions would actually draw participation.
Municipalities that have never conducted a sounding exercise reach the stage of setting public offering terms without understanding what private-sector partners actually want — leading to repeated non-competitive outcomes with no applicants.
Reading the Structure
Three-Layer Capacity Gaps
Breaking a municipality's internal capacity into three layers — individual staff capacity, organizational structure, and mayoral commitment — makes project formation potential a product of all three.
| Layer | High-capacity state | Low-capacity state |
|---|---|---|
| Individual staff | Dedicated role, 3+ years of continuity, PPP expertise | Concurrent duties, annual rotation, knowledge externally dependent |
| Organizational structure | Dedicated unit or division, cross-department coordination function | Single point of contact, inter-department coordination relies on individual effort |
| Mayoral commitment | PPP/PFI explicitly endorsed as policy, direct guidance issued | Attention concentrated on other policy priorities |
Municipalities where all three layers are in a high-capacity state have significantly higher project formation rates. Remove even one layer, and projects stall mid-process or disappear before they begin.
The Reality Behind PPP Desk Establishment
Among municipalities that report having "established" a PPP desk, the reality varies enormously. Some desks have two or more dedicated staff and the functional capacity to engage with private operators; others exist in name only with no substantive activity.
Whether private-sector operators feel they can "bring problems to the PPP desk" depends entirely on the desk's operational reality. The true measure of a desk's effectiveness is whether dialogue with the private sector is creating a cycle in which institutional knowledge steadily accumulates within the municipality.
The Potential and Limits of Accompanying Support
The Cabinet Office and Ministry of Land, Infrastructure, Transport and Tourism (MLIT) have developed expert dispatch and PPP advisor programs to supplement municipal capacity from outside. But externally dispatched experts are engaged for limited periods — and the critical question is what remains inside the municipality once the dispatch ends.
A model where external experts "form the project on the municipality's behalf" leaves no internal capacity behind. The effective model is one where the expert accompanies dedicated municipal staff until those staff can explain the process themselves. A practical completion criterion for accompanying support is whether the staff responsible can explain the evaluation criteria for operator selection to their own finance department.
No matter how complete the institutions, funding, and expert dispatch may be, municipalities where projects still do not emerge have a gap in at least one of the three internal capacity layers. Unless external support is designed to "fill the gap" rather than "substitute for the gap," the project formation divide will not close.
References
PPP/PFI Promotion Action Plan (FY2025 revised edition) — Cabinet Office. Cabinet Office
PPP/PFI Priority Review Regulation Adoption Status (as of end of March 2025) — Cabinet Office Private Finance Utilization Promotion Office. Cabinet Office
Survey on the Status of Public Facility Management Plan Formulation — Ministry of Internal Affairs and Communications. Ministry of Internal Affairs and Communications
PFI Project Introduction Handbook — Cabinet Office Private Finance Utilization Promotion Office. Cabinet Office