Rhetoric and Reality of Public–Private Partnerships

While public–private partnerships (PPPs) have lately come to be seen as an attractive vehicle to deliver public services, in academic circles, opinions remain divided about their impacts and performance. While the proponents strongly justify PPPs by citing a range of benefits, including enhanced efficiency, cost savings, risk transfer, and value for money, the critics tend to dismiss such assertions and label PPPs as risky and wasteful ventures that eventually lead to much higher costs. Thus, PPPs have been the source of an intense debate and controversy. This article is a contribution to this debate. Based on a review of two leading PPP projects in Australia, it argues that although PPPs may help achieve some short-term objectives, their overall performance falls short of expectations and declared objectives. The article shows that the benefits of PPPs are often exaggerated, that the projected risk transfer is incomplete or unrealistic given the long term nature of projects, and that the contract documents governing the relationships between parties are unable to capture all risks and uncertainties. Finally, it argues that there is a need to augment capacity and skills on both sides, and to undertake a far more careful and considered assessment of the costs, benefits and risks of PPPs. Keywords: PrivatizationPartnershipFranchise ModelContractsRisk TransferValue for Money Notes 1. In DB the government specifies the asset it wants and the private sector is responsible for designing and building it. BDFO is an extension of DB where private sector finances and manages the project for specific period before the government purchases it for a pre-agreed price. BOO and BOOT are very similar in that in latter the asset is transferred to the government after a specific period while in the former the private sector retains the ownership of the asset perpetually. LOO is similar to BOO projects but an existing asset is leased from the government for a specific period. Finally, an alliance is an agreement between the private sector and the government to share the benefits or the costs with associated risks. The agreement also outlines the benchmark price, time and service level. 2. The introduction of the private finance initiative (PFI) in the UK by the then Conservative government brought the most recent form of PPP to notice. The PFI aimed to procure and utilize financial capital from the private sector to build, operate, manage and deliver public sector infrastructure and services. Underpinned by the desire to transform public sector bodies from being owners and operators of assets into purchasers of services from the private sector the PFI has financed a broad range of projects from construction of infrastructure for transport, education and health services as well as the operation and management of prison services. 3. This, however, needs some qualifications. Some analysts argue that factors such as costs and consequences of unemployment as a result of labor shedding must be taken into consideration in determining the governmental benefits of outsourcing. This is because the government is responsible for paying unemployment benefits to those who fail to find alternative employment. It is a crucial point, for the outsourcing of Melbourne transport services saw the labor reduced by 16% (Greig, Citation2002

Actuarial science · Asset (computer security · Business · Economic growth · Economics · Economy · Government (linguistics · Private finance initiative · Private sector · Public economics · Public sector · Value (mathematics · Value for money · Community Development and Social Impact · Public Procurement and Policy · Public-Private Partnership Projects · Finance

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