Public Private Partnerships and Public Procurement

Abstract

ublic Private Partnerships (PPPs) rarely get good press, and public opinion is quick to condemn a PPP that does not succeed as a failure of the concept itself. Perhaps it is because, as Tony Harris, one of the staunchest critics of PPPs, once observed '… good news stories receive little attention in public … . The private infrastructure projects which appear less credible … get rather more attention' (Harris, 1998:11). His successor as NSW Auditor-General, Bob Sendt, admitted that 'the public — and possibly the political — mood has certainly turned against PPPs as a result of the Cross City Tunnel' (Sendt, 2006:3). While many in the community may remain suspicious of private sector involvement in public infrastructure, the reality is that old 'command and control' structures in the public sector are breaking down and are being replaced by new interrelationships between government and private sector entities. Rather than as an aberration, PPPs (or perhaps more correctly 'traditional' PPPs) need to be viewed as one form of public procurement, supported by many hybrid approaches that blur the lines between them and conventional procurement methods. This article examines this evolving marketplace. It begins by comparing conventional forms of public procurement with traditional PPPs, and then reviews the relative performance, and advantages and disadvantages, of these alternatives. PPPs are argued to introduce very different incentive structures and responsibilities into the procurement process. Nevertheless, traditional PPP models have some well-recognised limitations. Against this background, the article considers these problems and the new hybrids of PPPs and traditional procurement that have been developed, and experimented with, to address these issues. Consequently, there are no hard and fast rules as to what situations work best for PPPs. The real question is what particular procurement option, which may or may not be a PPP variant, is appropriate for the project on hand. Forms of Procurement With traditional procurement private companies have long been involved in building roads, hospitals, schools and public buildings, and in providing management and maintenance services. What differs with a PPP is that these separate arrangements are combined (bundled) into one contract and a private sector entity charged with providing, not a building, but a flow of infrastructure services over time. For example, under conventional procurement, the public sector body may enter first into a Design-Build (DB) contract, engaging a private sector firm to design and build a facility in accordance with requirements determined by the