Transparency in development policies - Policies and practices breakfast - 6 November 2013

Sharing values, resources and risks : keys to develop efficient PPPs

Providing institutional insight on PPPs, Prof. Ruben introduced his department’s role as evaluating the performance of public policies. In that respect, Prof. Ruben’s department was asked to study the effectiveness of PPPs in developing countries. 

The outcome of the research is threefold :

1. “A strict definition of how resources are shared on the partnership is crucial”. For the Dutch Ministry of foreign affairs, said Prof. Ruben, PPPs are considered as “a form of cooperation between government and business agents, sometimes also involving other organisations (volunteer organisations, NGOs, trade unions, etc.) that agree to work together to reach a common goal, carry out specific tasks, while jointly assuming risks, responsibilities and sharing resources.” But “In many of the arrangements, it is not well defined”, says Prof. Ruben. In these situations, most of the risk falls onto the public sector.
2. A PPP is hardly a deliberate choice : the PPP should make up for a market failure. An alternative solution should also be thought of, in order to serve as a benchmark. “Costs and benefits of fully public and fully private alternatives can be calculated, said Prof. Ruben, and they give an idea of the net advantage of a PPP.”
3. Finally “studies show that PPPs do deliver.” This conclusion was made, even if there are very little research on the delivery impact and not so much insight on the added value of PPP vs fully private or fully public solutions.

PPPs should bring an added-value to what would have been done without it.

Prof. Massi Benedetti pursued the debate on the concept of shared value and its link with development. According to him, a call for taking action and for new doctrines is appearing. It involves sustainability. These doctrines are based on three main factors : environment, health and labour, belonging, by definition, to the private and public sectors. “You cannot disregard any of these if you want to have sustainable development” , said Prof. Massi Benedetti. “This is therefore based on a new economic doctrine : the shared value doctrine” he continued.

Looking back at origins of the society, both private and public sectors have key roles to play. They must play together. 

Prof. Massi Benedetti explained that PPPs are no longer an option : they are a requirement. Public and private sectors have, under those constraints to work hand in hand. Therefore, he provided key takeaways to develop efficient PPPs :

• it is crucial to identify the factors that can jeopardise the whole project before starting a PPP,

• a basis for the success of a PPP is the concept of shareware : where private companies’ interests meet public requirements,

• it can be essential to perform a system analysis before implementing a PPP in order to identify possible areas of conflict between public and private parners.

Conflicts of interest are more damaging within an entity than between two entities, whether they are public or private. A few examples were given to illustrate this ambivalence (Insulin distribution in Cameroun, insurance system towards chronic diseases).

A need to clarify the PPPs’ rules

From the floor, questions were raised on the nature of PPPs, on the role of each actor involved and on advantages of PPPs in comparison with other solutions. Vincent Farrugia, Member of the European Economic & Social Committee, asked “is the public sector to play only a role of merely a regulator ? and the private sector to do anything else ? are PPPs the intermediate solutions?” while Gustavo Domato, from the EU office of the Red Cross, raised the question of the advantages of PPPs in comparison with classically-run projects.

According to Prof. Ruben there is no ‘one-size-fits-all’ type of interventions. Empirical evidence from various countries around the EU would help us draw models of PPPs. For him, there are two sorts of advantages of PPPs : the efficiency as “going through PPPs help save a lot of time by bringing players to the projects faster” and the sharing of the risk because “if you can reduce or manage risk, you achieve greater efficiency and effectiveness of a project” .

Prof. Massi Benedetti warned that there is a need to reinvent the PPPs’ rules that were crystallised and which can lead to conflict. Therefore, it is needed to identify the conflict of interest within and between institutions and to develop equal and balanced partnerships, notably through the redefinition of the mission of PPPs.

From his experience at EU-level PPPs, Prof. Massi Benedetti noted that more attention should be paid to the results of these projects, because sometimes resources are wasted once these projects are over.

PPPs : tools for public authorities to better serve their citizens ?

Jeroen Hardenbol from BUSINESSEUROPE was invited to give an update on the January session of policies & practices, discussing PPPs in the context of social policies.

During the former debate, the speakers concluded that PPPs can be efficient instruments to deal with every day’s challenges of public authorities to better serve the general interest while making the best possible use of tax payers’ money.

PPPs ensure a better value for money through the call of tender process. “Social elements, such as training policies, can also be taking into account” for a PPP contract, added Mr Hardenbol. Lastly, PPPs combine skills and know-how from both sectors leading to public benefits. At the same time, “Public authorities, even in engaging with private sector, will always remain in the driver’s seat”, he said. It is key to draft clear contracts and to ensure transparency during the process. Making calls for tender public and easily available is essential in this respect.

Mr Hardenbol regretted that the European market recorded in 2012 the lowest number of transactions PPP-wise in a decade : only 66 PPP transactions reached financial closure. This was down by 21% from the previous year. “There is an increasing need for PPPs and at the same time there is a decrease in the number of PPPs”, commented Mr Hardenbol, adding that the lack of awareness of public authorities combined with a lack of knowledge to develop such partnerships were often the reasons for the decrease. He insisted on the fact that a clear definition of selection criteria and PPP objectives in the contract might facilitate its implementation. Prof. Massi Benedetti added that bureaucracy was another important restriction. Therefore, a new challenge in the forthcoming year will certainly be to tackle this loophole through a better communication on the benefits that PPPs can offer.