Public-Private Partnerships

1. Public-Private Partnerships. Advocates of public-private partnerships paint a rosy picture of them as free-marketfriendly. From one of the main Web sites devoted to them comes the following, from a white paper published by the National Council for Public-Private Partnerships: Public-private partnerships are a means of utilizing private-sector resources in a way that is a blend of outsourcing and privatization. PPPs can involve the design, construction, financing, operation and maintenance of public infrastructure or facilities, or the operation of services, to meet public needs. PPPs are often ‘financially free standing,’ i.e., privately financed and operated on the basis of revenues received for the delivery of the facility and/or services. One key to this is the ability of the private-sector to provide more favorable longterm financing options than may be available to a governmental entity and to secure that financing in a much quicker time frame. Public-sector assets (including human resources and infrastructure) are often included. The agreement under which the PPP operates is closely governed by a contractual relationship between the public- and private-sectors, with the objective of utilizing the best skills and capabilities of each sector. The objective of a PPP is to provide a more efficient and cost effective means of providing the same or better level of service, at a saving to the public (both general and governmental). More briefly, in a follow-up report: …PPPs are contractual arrangements under which the public and private sectors join together in a partnership to utilize the best skills and capabilities of each to better serve the public. Public-private partnerships are formed to meet an objective that any constituency would want—to provide the highest quality service at the most optimal cost to the public. In other words, according to their advocates, public-private partnerships use the financial resources of business (the private sector) to carry out activities or functions government (the public sector) has assumed for itself. Implied here is the recognition that private enterprise is more efficient than government. As one quoted expert put it, in arguing for the necessity of public-private partnerships: Counties, states, provinces and communities have hit the ‘tax wall,’ meaning they have no more room to raise taxes. Doing so would either violate some constitutional or statutory limit, or send people and businesses packing for friendlier climes. In other cases, government simply has not kept pace with technology and productivity advances and must rely upon private enterprise to put its unique expertise to work. There are now thousands of public-private partnerships in place throughout the country, engaging in activities ranging from building roads and neighborhoods to providing water and wastewater services to renovating government schools to overseeing the management of real estate to providing health care. This number seems destined to grow in the immediate future. It is fair to say that public-private partnerships have been accepted without question by the ‘mainstream’ of both government and business. This is because a new ‘paradigm’ for the relationship between the two has emerged, very gradually, over the past few decades. This ‘paradigm,’ of course, is that of sustainable development, which combines the power of the purse, one might call it, with the power of the sword. The resources of business (the power of the purse) are utilized to do the work of “governance” (the power of the sword)—with the former’s full cooperation and support. The reports we cited noted several examples of what appear to all intents and purposes to be successful public-private partnerships—successful, that is, in achieving the ends wanted within government. Expansionist or interventionist government—the idea that government should undertake responsibility for managing huge portions of a country’s economy and infrastructure—is taken for granted, but limits on the capacity of government to effect change by itself are acknowledged. The solution to the problem of the limits on the capacity of government, in the new paradigm, is to employ the resources of business, in a way that brings business fully on board and enlists it as collaborator—or partner. Of course, the larger the business the better, because bigger businesses tend to have deeper pocketbooks than smaller businesses. The critics of public-private partnerships usually cited in the favorable literature are not those who do not trust government but those who do not trust business. The latter see private-sector involvement as—in the words of one critic—“a plot to establish a completely free market with overtones of dog-eat-dog survival of the fittest, and culling of the weakest….”4 I don’t believe that “dog-eat-dog” laissez-faire is on the public-private partnership radar screen. Far more credible allegations, however, can be mounted not just against public-private partnerships but against the ‘paradigm’ in which they are most at home. But first, we must do more of the historical detective work and identify more of the major behind-the-scenes players. You may download the rest of this paper in pdf format by clicking http://www.freedom21santacruz.net/site/downloads/Yates_PPP.pdf This paper is published on the www.freedom21santacruz.net site. [Proofreader's note: this article was edited for spelling and typos on May 26, 2006]

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