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Public-Private Partnership as a Policy Instrument

Hong Qiu

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Outline

1. What is P3 1. What is P3

3. How to develop P3 3. How to develop P3

Case 1:The Confederation Bridge Case 1:The Confederation Bridge

Case 2:Sponsorship Program Case 2:Sponsorship Program

2. Why P3 2. Why P3

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A Historical Overview

• Early 1980s in USA and UK

• Increasing public debt

• Emergence of New Public Management

• A dramatic growth in the development of a very wide range of P3

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A Historical Overview

• Canadian Council for Public-Private Partnerships (CCPPP) was established in 1993

• Canadian federal government and Policy on Alternative Service Delivery

• A Canadian guide on P3 was issued by Industry Canada in 2001

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What is P3

• Public-Private Partnership is a co-operative venture for the provision of infrastructure or services, built on the expertise of each partner that best meets clearly defined public needs, through the most appropriate allocation of resources, risks, and rewards.

Canadian Council for Public-Private Partnerships, http://www.pppcouncil.ca/aboutPPP_definition.asp

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What is P3

• The main idea is the same:– How to utilize private sector’s expertise and resources

to address public needs or to meet political goals

• But no standard definition– P3 takes a wide variety of forms, discrepancy on

contract services and privatization– Legal implication of “partnership”– Development of P3 blurred the boundaries between

public and private sector– Evolution of the concept of partnership

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P3 and the Risk Transfer Continuum

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Why P3

• From the controller to the partner• Internal impetus

– Fiscal deficit– Extensive spending cuts and public service

downsizing – New ideas about public service delivery

• External pressures– Information technology weakened governments’

power over individuals– The need to develop domestic private sector’s

capacity in response to global competition– NPM, emphasis on decentralization and efficiency

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Why P3

• The new politics calls for new skills –

skills in building bridges and alliances, broking interests, forging consensus, articulating shared values…The future of governance is partnership and shared responsibility.

Jim Armstrong , Donald G. Lenihan

From Controlling to Collaborating: When Governments Want to be Partners

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Why P3

• Change of values – Relates to the role shifting of the govt.– Crown Corporations vs. P3/Privitization

• The term partner conveys a sense of empowerment, flexibility, collaboration, consultation, proactivity, efficient and a service orientation

M. Charih & A. Daniels (Eds.)

New public management and public administration in Canada

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Why P3

• Evaluation of policy instruments – Effectiveness

• e-government initiatives and private IT companies– Political feasibility

• The increasing public demands– Administrative feasibility

• How to hold private sector accountable for delivering public service ?

– Efficiency• Private sector is better at delivering value for money

– Equity • private sector is given equal opportunities to compete with

governments’ departments • How to ensure the equity criterion will be complied by private

partner?

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Why P3

• A blended approach

• P3 often comes with other policy instruments – e.g. spending, information and regulation etc.

• The success of P3 depends on how well the instrument package works

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How to Develop P3

• The pros and cons of P3

• The implementation problems associated with P3

• How to overcome these problems

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P3 Matrix

Parameter Components

What is the purpose?

•Focus: range from external-oriented to internal oriented •Aims: range from employment creation to employment redistribution•Range of activities: range from single project to long-term program•Level: range from strategic-oriented to one-off project collaboration

Who is involved?

•Range of actors: range from public sector to private sector•Structure: range from legal binding contracts to general agreements•Process of mobilization: range from top-down approach to bottom-up approach•Power relationship: range from unequal power to fair power relationship

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P3 Matrix

Parameter Components

When?

• Stages: range from pre-development to operation• Decision points: range from close partnership to

continuous partnership

Where?• Area: range from geographical area to client group

How?

• Implementation mechanism: range from stand-alone partnership organization to agreements influencing existing services

Adapt from S. Osborne (ed), Public–Private Partnerships: Theory and Practice in International Perspective

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The Confederation Bridge

• A 13 km toll bridge built in 1997 linking Prince Edward Island to New Brunswick

• A Build-Own-Transfer P3 project valued at $840 million

• What purpose? – Reduce public cost

• Why P3?– Fiscal constraints– Private technical expertise

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Provincial GovtsProvincial Govts

NB Crown Corp.

Other Federal DeptsPWGSC

SCDI

P3 & Intergovernmental

collaboration

P3 & Intergovernmental

collaboration

Who is involved?

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The Confederation Bridge

• Stages (when)– From proposal stage to the completed

construction, 10 yrs– Construction period, 44 months – SCDI will operate the bridge for 35 years

(1997 to 2032), then transfer the bridge to the federal government

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The Confederation Bridge

• Area (where)– “a continuous means of communication

between Prince Edward Island and the mainland.”

• Implementation (how)– Feasibility analysis and negotiation were quite

long – Focus on risk management– Significant delay due to a federal election

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The Confederation Bridge

• Overall, a positive experience

• 1+1>2 effects– compared with former failing efforts to build

such an infrastructure

• Innovative design– a 100-year design life vs. an average 40-50

year life span

• Effectiveness and efficiency– a 44-month construction period is remarkable

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Sponsorship Program

• A contract P3 program initiated in 1997 • Became a scandal and got cancelled on

December 2003• What purpose?

– promote the profile of federal government in Quebec

– more strategic-driven rather than project-driven

• Why P3?– Lack of in-house marketing experiences

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Advertising Companies Advertising Companies Crown Corps.

Communication CanadaAfter 2001

CCSB

Who is involved?

Contracts

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Sponsorship ProgramExpenditures and events sponsored

Source: http://www.oag-bvg.gc.ca/domino/reports.nsf/html/20031103xe01.html

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Sponsorship Program

• Area (where)– Quebec and 1995 referendum

• Implementation– has been audited at least three times since 2000 for

misused funds and mismanagement problems

• “The use of the Sponsorship Program for purposes other than national unity or federal visibility because of a lack of objectives, criteria and guidelines for the Program”

2003 Auditor General’s report

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Sponsorship Program

• Presents many negative aspects of P3

• Sacrificed public interests – political corruption – lack of performance and risk management

• Accountability problems – within the public sector, top-down decision-

making and speak truth to power– contracting out model puts little risk on the

private partner

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• Partner selection problem – process is manipulated by someone – there is a weak market and the potential

partners are limited

• Organizational difficulties – in the public sector, election or public sector

reform– in the private sector, the risk of bankruptcy

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Lesson Learned

• The reason for using P3 must be justified

• Clear criteria for partner selection

• Selection process should be competitive, impartial, and transparent

• The role and responsibilities should be clearly defined and fully communicated

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Lesson Learned

• The commitment for the project should be demonstrated by all partners

• a reasonable and fair share of resources and risks and mutual benefits

• A systematic management framework

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Conclusion

• PPP is like a marriage

• It takes time for partners to get to know each other and find a good way to work together

• The earlier private partners are involved, the better results may be achieved

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Thank You

Questions? Comments?