Transcript Adjusting the Role and Size of Government: Who Leads in

Adjusting the Role and Size of
Government: Who Leads in
Today’s Pubic Private
Partnerships?
Andrew Graham
School of Policy Studies
Queens University
Kingston, Ontario
Outline of Presentation
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Background
Defining public private partnerships
Potential benefits and risks of public
private partnerships
Types and uses
Specific examples
Lessons learned and policy implications
for government and partnering sectors
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Background
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Emergence of new public management concepts
 Alternative Service Delivery – public private partnerships are a part
of this
 More business like approaches
 Seeking collaborative solutions
 Third party delivery – either through private sector or voluntary
sector
Fiscal challenges of 90s and search for new strategies to finance costing
capital projects
Efforts to downsize government either by reducing its size completely
(full privatization or downloading) or moving projects and organizations
“off the public books”
Steering and rowing: setting policy and program directives versus actual
service and project delivery
“To a growing degree, the work of government is only partly work by
government.” – Donald F. Kettl, Brookings Institute
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Defining Public Private
Partnerships
“A formal agreement to share power
with others in the pursuit of joint goals
and/or mutual benefits.”
- Professor Kenneth Kernaghan, Brock
University
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Potential Benefits and Risks of
Public Private Partnerships
Potential benefits
 Cost savings
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Risk mitigation
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Improved service levels or
innovations
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Enhancement of revenues
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Other economic benefits
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Acquisition and sharing of
skills and new technologies
Potential risks
 Loss of control by
government
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Increased user fees
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Political risks
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Accountability issues
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Unreliable service
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Lack of competition
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Bias in the selection process
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Poor management of the
relationship
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Types of Public Private
Partnerships: A Spectrum
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Consultative arrangements: governments seek expert input
form groups and organizations in society – little real
empowerment of participants
Contributory partnerships: a public organization agrees to
fund or sponsor a non-governmental organization (or level of
government) that will carry out an activity or project over which
the sponsoring public agency exercises little control
Operational partnerships: government and an organization
work together to achieve compatible or complementary goals –
typically with the non-profit sector – government often provides
seed or support funding
Collaborative partnerships: private-public partnerships
where this is joint responsibility for decision-making and the
provision of resources by both parties – risks and goals are
shared
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Examples: The Confederation
Bridge 1997
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Linking mainland Canada and the island Province of Prince
Edward Island
Major technological and logistical challenge – 13 kms in length
over open water
Federal government developed project criteria and held open
bidding for private sector partners: Straight Crossing
Development Incorporated
Private sector responsibilities: finance, design, plan, engineer ,
construct, manage and complete the bridge on time
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Examples: The Confederation
Bridge 1997
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Further, it would operate the bridge for 35 years,
taking the revenue from the tolls charged after
maintenance was complete – after that period, the
Bridge reverts to public ownership and operation
Public funding to reduce toll rates equivalent of public
funds previously expended on subsidized ferry
services
Extensive efforts to ensure that the public interest
was protected:
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Careful monitoring by public officials of the project
Detailing of maintenance responsibilities and control of toll
revenue until maintenance is complete
Environmental assessment and monitoring
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Examples: Canarie: Canada’s
Information Superhighway 1993
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Joint effort of the federal government and over 140 fee-paying
members from the public and private sector
Led by Industry Canada, a federal government department
Develops both hardware and software to operate and
continuously upgrade Canada’s high-speed Internet backbone
Has succeeded in making Canada one of the most connected
countries in the world
Canarie is run by a board of director with equal representation
from the public and private sectors
Quarterly reports to the Minister of Industry and annual reports
to the Auditor General
Federal contribution is 25% of costs – private sector is 75%
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Examples: Building a New
Expressway in Toronto 1995-1999
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Project of the Government of Ontario
New highway needed to by-pass Toronto: while it had planned
to build it, the Government did not have the financing
Opened to public bidding by private firms: highway built by
Canadian Highway international Corporate: concept was that
this corporation would operate the toll road and turn it over to
the province in 30 years
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Examples: Building a New
Expressway in Toronto 1995-1999
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Financed by a provincial Crown agency: Ontario Transportation
Capital Corporation (OTCC): borrowed the funds with province
assuming full responsibility for financing and building the
highway
Strongly criticized by the Provincial Auditor as a poor publicprivate partnerships since the government assumed too much
risk and got little benefit: very few contracted risks assumed by
the private sector
Government admitted that this project was a failure and
subsequently sold the road, thereby losing future income flows
and return of the property
Tolls have risen significantly as the private firm seeks to meet its
revenue requirements
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Examples: Ontario Ministry of Community
and Social Services: Technology
Upgrading through partnerships 1996
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Comsoc wanted to replace its computer systems and develop a
province-wide delivery system with new business procedures
Linked to the Ministry’s overall business transformation project,
including welfare reform
Anderson Consulting was selected as partner
Project administered through a cost pool and a benefit pool
(attributable savings): both parties could recoup their costs from
either pool, although the private firm recouped significantly
more than government: built on the assumption that benefits
will exceed costs: this did no happen here
Costs rose exponentially, from $50 million to $180 million – all
risk reverted to government
Many of the cost overruns were associated with changing and
increasing demands of Anderson by Comsoc: out of scope costs
outside the initial agreement
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Examples: Ontario Ministry of Community
and Social Services: Technology
Upgrading through partnerships 1996
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Agreements were made to take certain costs “off book” so that
there was not a full reporting of either costs or savings
Comsoc decided, as a matter of good faith, to distribute benefits
to the Anderson before they were realized
By 2000, costs continued to outpace benefits by $30.5 million
The implied notion that the private sector firm should pay part
of the risk was never explored.
Comsoc failed to protect the government from uncontrolled cost
risk: it did not use traditional public-service concerns for
process, control and public oversight in a rush to bring in a
private sector partner: it became subject to continuing external
scrutiny from the Provincial Auditor and Legislature committees
In truth, its reputation as a sound public manager on virtually
any front was severely damaged as well as its credibility
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Lessons Learned and
Observations
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Risk sharing is a crucial element of successful public-partnership
agreements: a strong tendency for the private sector to
minimize risk is natural
Need to build in safeguards that commitments will be upheld,
e.g. withholding earnings until maintenance is complete
Governance is important: how decisions are taken and an
understanding of the accountabilities and how they will operate
Collaborative partnerships, especially with the not-for-profit
sector can often become confused when both sides pursue a
multitude of goals and roles and the purchase and provision of
services is but one element of the relationship
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Lessons Learned and
Observations
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Accountability is indivisible: the public sector partner has a
unique set of accountabilities that cannot be divested: Ministers
are accountable and answerable; public sector legislated
auditors have the duty to examine these partnerships and report
to their legislatures; the public has the right to see an
accounting of funds and program objectives
Success stories show the potential to import private sector
practice to complex projects and deliver them in a timely and
cost-effective manner
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Lessons Learned and
Observations
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Rushing to involve the private sector without hard negotiations,
definition of risk and documentation of the contractual
relationship will only increase public risk
Governments appear to be able to build better partnerships
around specific projects and with the private sector or not-forprofit sector but perform poorly when the partnership is less
clearly defined and closer to involvement in policy making, i.e.
with NGO and interest group – those partnership that are more
consultative or contributory
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Elements of success in public
private partnerships
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Broad interests included: greater public good and recognition of
private sector requirements
Mutual dependence
Empowerment: clarity of who is responsible for what
Synergism: the fit is right
Mutual goals: agreement on the roles and responsibilities of
each party
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Elements of success in public
private partnerships
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Contractual arrangements: a hand shake will never do; the devil
is in the details
Effective public managerial oversight: traditional public sector
concerns for process, control and oversight remain essential
Shared risk: governments have to become sharper at estimating
and managing risk
Prevalence of countervailing expertise essential: ministries
cannot simply act as ‘hollowed-out’ entities devoid of
knowledge: they must, in fact, be knowledgeable buyers
Clear thinking: precise goal setting, avoidance of ‘fuzzy
boundaries”
A well developed understanding of the financial and
administrative capabilities of each partner: the adequacy of its
infrastructure
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