Public-Private Partnership is collaboration between a government agency and a private sector company in regards to the financing, building, and maintenance of public infrastructure, transport, and digital systems. This type of partnership has risen in popularity over the last decade due to a number of factors; increasing populations and demands often leave local governments unable to fund projects on their own. Private enterprise steps in to fill the void.
How Public-Private Partnerships Work
Let’s say a local government has to replace an aging public transportation system but does not have access to the funds. Perhaps the city is heavily indebted or simply does not have the liquidity required to undertake the project. This is where the private sector steps in.
The private company will agree to invest in the project if it can have a share of the operations revenue. These agreements usually have term limits of 25-35 years.
While many people are wary of private interests getting involved in public infrastructure projects there is often no other option. As populations grow, technology increases and public demands become more in-depth, cities and municipalities have to look to other funding options. Ideally, a Private-Public Partnership should be a win-win for both parties, there should be a mutually beneficial exchange of services between both parties. The city offers access to land, permits, customers, and design, and the private company offers funding.
Here we will look for tips for ensuring a Public-Private Partnership is mutually beneficial and a worthwhile endeavor for both parties.
Develop a Shared Vision
The role of the developer in a PPP is much different than it would be in the private sector. “In the private sector, developers have much more authority on how projects are undertaken. Everything from design, management, and subcontracting is under their domain. In a PPP the private developer often has many more constraints on them. Design, operations, and management are usually dictated, at least in strong part, by the public side of the deal,” writes Henry Zorad, an entrepreneurial adviser at Writinity and LastMinuteWriting.
Because of this, both parties have to come to a concrete understanding of how the project will unfold; they need to share a vision. Failure to do so will most likely result in strained relations, disagreements, and poor project outcomes.
Complement Weaknesses and Strengths
This is especially true for the public end of the deal. Local governments have much strength on their side. They do not have to deal with the zoning, permitting, and bylaw issues that private sector developers have to.
While this is true, they also lack a great number of skills. The ability to get a project done on time, under budget, and to the required specification is not the government’s strong suit. If it was they wouldn’t require Public-Private Partnerships in the first place. “Private sector companies develop skills because of the competitive nature of their business. If they fail to deliver on time and cost they simply will not survive in the market,” writes Nina Bailey, a business blogger at DraftBeyond and Researchpapersuk. These types of skills should be leveraged by the public side.
Minimize Multiple Stakeholders If Possible
Major issues arise when multiple private sector firms get in on the action. This more often than not results in friction and conflict as both sides compete to get more out of the arrangement while investing less. This also creates a new layer of management upon completing when operational income begins to roll in.
In some cases, this type of arrangement may be preferable. This is most commonly seen when a project requires a level of specialization that one single company does not possess. One may be very good at one thing but inexperienced at another. Going with just one company in this type of situation may result in poor quality work or problems in the future.
As previously stated, the growing population and advancements in technology have resulted in more infrastructure that needs to be built and maintained. Local governments these days are not often equipped with either the financial or technical resources to build, operate, and maintain these projects. As a result, one can expect the number of public-private partnership deals to increase in the coming decade.
About the Author
Ashley Halsey is a professional writer at Lucky Assignments and Gum Essays. Throughout her career, she has played a major role in many projects, large and small, all throughout the country. When she is not working the mother of two enjoys traveling, reading, and attending business and self-improvement seminars and courses.