An Innovative Solution?
Public-Private Partnerships: An Innovative Solution?
By Valerie Martinelli, MPA
One of the many challenges facing all levels of government is consistently finding new techniques to innovate and undertake policy and project necessities while saving the taxpayers’ money and employing individuals. Local, state, and federal government all have strict budgets and may have outsourced and/ or reduced their workforce, which can affect the efficiency of a project, program, or service. However, outsourcing and workforce reduction may not always be appropriate solutions, especially when there is work to be completed or a service that must be delivered. So where do those funds originate and how can a project be managed?
What is a Public-Private Partnership?
Public-Private Partnerships, PPPs, or 3Ps, are an excellent way for governments to deliver a service without requiring extra taxpayer money. 3Ps are generally utilized for large, expensive projects, such as those involving infrastructure. So what exactly is a 3P? Private sector investors interested in the specific project or program fund this type of partnership. While 3Ps are not perfect, they can offer a high delivery of service, complete an expensive project, or subsidize essential infrastructure improvements. A 3P requires a contractual agreement for the public sector agency and the private sector entity. It is through this agreement that the expertise and resources of both sectors are shared within the delivery of service or the facilitation of a program for the public. Each sector also shares in the risks and the potential rewards.
Seven Keys to a Successful Partnership
The National Council for Public-Private Partnerships outlines seven keys to success for a 3P. The first key is the necessity for public sector figures to support the project and the employment of a 3P. By serving as a spokesperson and advocate, it can minimize any misconceptions and allow the value to be conveyed. Secondly, there should be a statutory foundation for the implementation of the partnership. Transparency and a competitive proposal process are critical as well because they can be a positive mechanism to initiate an innovative approach to address public sector needs. Third, the public sector agency should have a team dedicated to 3P functions projects or programs. It is in the best interest for this team to be involved at all stages, including within the Request for Proposals. The proposal process requires the development of performance objectives. There are calculations that should be completed in order to demonstrate the economic value through each stage of the project, such as the Value for Money and a Return on Investment (ROI) calculation.
A comprehensive contract, which details the business plan, is also critical to the success because it delineates the responsibilities, risks, and benefits for both sectors. This contract should also clearly detail a method of dispute resolution. It is imperative for there to be a distinctly identified revenue stream as well. It is important to remember that the investor is providing only a portion or possibly all of the up-front costs of the investment; however, there must be a reasonable rate of return for the duration of the partnership. Stakeholder support is also critical in order for success. This may include employees, labor unions, the public and pertinent interest groups. Lastly, partners must be chosen carefully according to expertise and not just corresponding to the price on the bid.
Other Types of 3Ps and Benefits
3Ps are not only utilized within infrastructure projects, they can be utilized within healthcare, education, information technology, gaming (such as lottery operations), and environmental projects as well. Case studies have been completed in areas such as energy, operations and management, public safety, public works, and real estate and economic development. In order to earn my MPA degree, I was required to complete two Capstone courses. It was within these two courses that I had the liberty of researching and building my own 3P, which enabled a greater understanding. My research project was healthcare focused through the construction of a pediatric mental health program. Through the innovative and unique partnership of a 3P, new projects and programs can create jobs and stimulate economic growth all while tackling policy requirements and regulations. For these reasons, this type of innovative solution should not be disregarded.