Effectiveness of Public Private Partnerships Cooperation Between Business and The Government - Essay Example

?Running Head: Public Private Partnerships Public Private Partnerships [Institute’s Public Private Partnerships Introduction Before probing deeply into this topic, it is essentially important to describe the meaning of Public-private partnership. It is utterly difficult to envelope public private partnership in a single neat definition, ‘Public-private partnership deals with a co-relationship between government and the private sector.’ The word Public Private Partnership, originates from America and it refers to the affiliation between public and private sector, in which the public sector provides the services (Yescombe, pp 2, 2007). The roles delegated to both parties are different from each other. The government plays the role of strategic planner and the private sector to design, the construction part as well as the financial support. It is significant to mention here that the private party has to take the responsibility of financial, technical, as well as operational risks in the task. Due to the current economic recession, the significance of public-private partnership has been increased as now governments are facing grave economical pressure and private-public partnership has become a strong medium to facilitate the building of infrastructure because the investors have been encouraged to invest in the building of infrastructure that may include hospitals, re-creational parks, educational institutions, etc. During these contemporary times, Public Private Partnership has become an essentially reliable substitute in terms of providing value for money. These types of partnerships can be beneficial to attain more revenue than the publicly funded projects for the government as the private sector funds and finances them. Hence, private public partnerships offer value for money because the cost is low for construction and services, moreover, the rate of efficiency is greater than projects funded and operated by the public sector. The value for money is also achieved by the fact that all the services are provided to a single sector. For instance, model, construction and efficiency all are the responsibilities of the private sector. These services can be given to separate contractors but that is not the case with public private partnerships for they give value for money to both the sectors. In such sort of relationship, there is a co-dependency of both the parties involved. The responsibility of government is of primal importance as it is solely the duty of government to provide the private sector with public services. Hence, governments are making use of such partnerships thereby getting massive financial benefits from public private partnerships. Apart from providing value for money, public private partnerships are also useful for providing newly formulated designs, advanced public services, and an excessively rapid process of construction. Some governments are facing alleged accusations of using public private partnership for political motives. It is a substantial fact that public private partnership function properly under the mutual affinity between the private and public sector thereby making pp services as non-privatized and non-nationalized services. In addition to it, such partnerships offer mutual dependency upon each other, which allows them to attain remarkable results. The core issue related to public private partnership is budgeting for it entirely depends upon the financing of the private group. For instance, if finances and cost of the project are the responsibilities of the private sector, the government does not feel the necessity to take control of matters related to finance. However, when funds are un-available, government feels the need to meet the financial requirement by imposing public taxes. Trans-European Network for transport is proposed to alleviate problems related to financing in public private partnership. This network is constructed to meet the requirements of recession and inflation. As with the descending economical condition of many countries, it becomes difficult for governments to fund the public private partnership. Thus, the private sector finances the projects to help government is such times of economic recession. There are many forms of public private partnerships depending upon the business and finance controller of the project as sometimes it is solely in control of the public sector or in control of the private sector the other times. Therefore, the success of public private partnership lies in the fact that the roles designated to both the parties involved are clearly discriminated from each other and it allows them to work independently in joint ventures. Both government and private sector mutually share the economic benefit. However, the private sector plays the role of an investor as well as the service provider. Then the factors attributing to the working of public private partnership come. Some factors can affect public private partnerships and these include the nature of the project, its magnitude in terms of finance, budget availability as well as the rate of government’s involvement. These factors determine the kind of public private partnership in general. Owing to these factors, the basic forms of public private partnerships are ‘DCM (Design, construct and maintain), BOO (Build, own operate), BOOT (Build, own, operates and transfers). These three different types of public private partnerships are beneficial for different types of infrastructure building. For instance, BOOT is of great use in water and electrical services. Whereas, DCM and BOO are of great use in terms of other projects related to infrastructure. The most widely used scheme is BOOT public private partnership, as it is widely in practice by various countries to facilitate the infrastructure development. Like every other business scheme, public private partnership also has its pros and cons and therefore public private partnership may face certain difficulties while raising revenue and financial benefits. Nonetheless, public private partnerships are widely in use to gain multiple benefits. The economical and developmental aspirations of the parties involved in public private partnerships are directly proportional to the task division amongst the private and public sector. In United Kingdom, a series of steps are introduced to take public private partnership to a farthest level of improvement. Owing to these steps taken by United Kingdom, many other countries of the world are admiring and following the strategies of United Kingdom to improve the status of PPP for public services. Moreover, many countries are now thinking to adopt private financing methods as an alternative to meet the requirements of public services because for the third world countries, it becomes excessively difficult to arrange heavy budget for such projects and private financing can aid greatly to meet the budgetary limitations. For PPP projects to work efficiently, there is a great deal of duty heavily placed upon the government as the governance mechanism is essential to improve the condition of PPP, making correct decisions, risks of project failure and the delivery of services on time. Good governance in a project is essential for regulating the actions, strategies, policies, requirements, as well as quick delivery of the project involved. It is a known fact, that PPP is a newly introduced process of partnership so; there is a great deal of shortage of PPP experts in the world. Therefore, it is very important that the past experienced and lessons should be shared with other parties and organizations who are interested in PPP’s project. The key to attain success in PPP, therefore, lies in the fact that the limited expertise should be used properly and correctly to facilitate the projects that come under PPP. In this case, both public and private sector have to understand and perform their duty skillfully as their duties are different from each other. The public sector deals with technical and financial tasks and matters related to legalizing the process of construction. The experts involved both in public and private sectors should have all the necessary skills and authentic knowledge to implement the project successfully. There are different steps and phases involved in the projects of public private partnership and each phase has its own requirements that are to be fulfilled by skillfully by the management and experts involved in the project. For instance, in the under-developed countries, the cost price of services is un-predictable and the cost can ascend at any time, thus, it becomes the duty of the finance experts to analyze the situation prior to the project implementation thereby determining the unforeseen future expenditures of the services. Therefore, the first stage of the project in public private partnership is crucial and significantly important as it is going to have a strong impact on the implementation of the project in later phases (Robinson et al, pp 10, 2010). The ingredient for a successful implementation of public private partnership projects also involves a proper and we thought management strategy. The management should have a strong bond between all the experts and professional those constitute it, as they should be vocally clear and transparent to all the stakeholders who are involved in the project. The management also holds the duty of analyzing whether or not the investment is sufficient for the project. It is also their responsibility to update the stakeholders about the overall general review of the risk factor involved in the project (Robinson et al, pp 10, 2010). The efficient working of PPP project depends on the present economical growth. Thus, it is difficult to define a particular model, which can operate the PPP project. Public Private Partnership is becoming famous around the globe, therefore; each project requires proper attention and understanding to perform it with its own specifications and references. However, this interpretation does not mean that there is no table or universal adoption of rule to develop a well-designed PPP project. Economists believe that transparency is a crucial aspect in PPP’s case. PPP execute the public services away from the budget and off from public’s eye, therefore; the public liabilities are to be informed properly (Robinson et al, pp 22, 2010). Some countries have introduced the responsibility of government towards the public, considering public liabilities (Robinson et al, pp22, 2010). Case study Los Angeles Metro’s compressed Natural Gas fueling Facilities’ Historical Data Board of Directors of Metro approved the compressed natural gas fueling facility policy in October 1993. Metro made a rapid progress and 540 CNG buses take their fueling from Metro. It was done through four fuel facilities, designed by Metro. It is now, fueling 2,490 CNG buses from 10 CNG facilities. It is the biggest fueling fleet in the country. The total improvement in Capital is equal $40m (SCAG, 2006). Procurement Strategies of Metro fueling policy Following are the procurement strategies designed by the Public Private Partnership involved in fueling facility policy: Design/build The design responsibility of the logo and other things required in advertising and sale is on the construction team. It decreases the total procurement-processing period and the risks in change orders are directed towards construction and building team. Operate and Design/build It holds the same benefits like design/build procurement strategy. The only change is that the agencies operational interference is less. Design, bid and build The design, bid, and team have the responsibility to develop and organize the drawings and functional objects that can define the CNG fueling facility. Design The functional design is the responsibility of experts in industry. Design/finance/build/operate and maintain Other than the expenses of capital improvement, RFP may have evaluating factors. Finance Finance frees the public agencies agents to balance the cost of capital infrastructure in a different way. Build The build teams’ task is to keep a focus on the costs of life cycle. They do not worry about minimizing the expenses of capital improvement. Operation The focus of the agency diverts from fueling facilities to mission tasks. Maintenance Since, the estimation of source selection depends on life cycle the work of maintenance function increases. The public agencies have the right to utilize capital private investment to develop true turnkey in order to establish the capital infrastructure, which is interest producing. Qualifying infrastructure includes; buses, rail lines, airports, public water projects, harbors, sports venues, and bridges. The limited capital funding is free for development projects that are not built otherwise. The proposal requests free the public agencies to make use of other factors than contract award only. The public private partnership can qualify for capital improvement expenses provided the fueling facility be designed as capital lease and the benefits it produces are healthy for current net value basis (SCAG, 2006). The life cycle factors include; construction expenses, lease facilities interest, expenses of CNG. Compression, energy expenses to maintain and drive CNG engines, maintenance expenses of spares, labor, repair, and overhauls. The life cycle factor also includes warranty. The public private partners can finance the project directly. The partners have to bring a partner of finance in the project. The public agency can compare the finance part from the design/build/operate and maintenance part of the project. Summary The public private partnership plays a great role for public agencies and it depends on the well-constructed project. The well-structured project can help in obtaining advantages in performance. The risk is low and the overall interest is higher. The results of a public private partnership are directly proportional to the expectations of the personnel who are working on the project, as they are aware of the risk factor involved in the project because nothing remains certain fuel served throughout 365 days of the year, without any breakage helps in winning reliability. The fuel consumption of the buses remains limited and specific which can facilitate the efficiency of the vehicle used (buses) (SCAG, 2006). An outstanding performance is attained by public private partnerships in the above-mentioned case by following some simple objectives and these include the loss of potential cost is prohibited by introducing and using turnkey methods. The designing team executes the project by adding more reliability and effective working of the vehicles used (buses in this case). The impact of public private partnership is very crucial to the development of a strong economy because it is clearly a long-term investment opportunity, which has the capacity to benefit both public and private sector. The outcome and growth of such partnerships is long lasting and self-sustaining. Apart from economical growth, other benefits of public private partnerships include a thorough improvement in the living standard of people, thereby causing a reduction in the poverty of society. The impact of public private partnership upon the government can be huge for it has the ability to ascend the economical, social, geographical (building infrastructure), political, as well as educational conditions of the country. To add to it, such partnerships can also offer massive chances for the private sector to grow with an outcome of newly developed markets and corporate business opportunities. However, all such progress is possible only if, public and private sector opt to play their roles wisely and effectively. During the current rough times, when everything appears to be falling apart because of the economical downfall, various private institutions are facing challenging financial losses. They are trying to make use of such public private partnerships to meet their financial needs in the future. Therefore, it can be said that in the near future, these partnerships have a huge scope to improve the coming economical scenario of the world in large. In such partnerships, the parties can only get successful results if the responsibilities and accountabilities are clearly defined and designated to both the sectors. The private sector who acts as an investor should share the financial benefits gained through active rate of efficiency and cost cuttings. The outburst of new markets and newly formulated and designed infrastructure with innovative and fast forward technology is going to change the face of the world. Conclusion Public private partnership plays a very important role in today’s economy. The well designed project not only helps the parties to stay committed to their work but it also offers them a scope of improvement than the previous project, the risk factors are reduced, reliability is higher and the efficiency of the project is also higher. Two minds produce a better result together; separate roles are designated to both the parties making it excessively easy and manageable to meet the deadlines and requirements on time. The business opportunities have been increased to such a higher level that now there is hope for a betterment in future regarding economical upheaval as the economists of today’s world are prognosticating and analyzing that such type of partnerships can be self-sustained and reliable in a longer term than other business projects. One of the biggest advantage of public private partnership is that incase, of any mishap or loss in the project; the expenses are shared by both the parties involved. Therefore, the risks of bigger losses are minimized. Another significant advantage of these partnerships is achieved by the fact that it is essentially duty of the government to decide the user charges on which a normal person can use the infrastructure. The government, therefore, keeps regular check on the performance level of all the services provided by the private sector. The private partners have the responsibility to take care of the maintenance and workings of the project involved as per the instructions set by the government. This results in consistent and efficient working by the private sector. References Corry Dan. 1997. Public Private Partnerships. Institute for Public Policy Research. Geddes, Michael. 2005. Making Public Private Partnerships work. Gower Publishing. Hardcastle, Cliff. 2003. Public-Private Partnerships. Wiley-Blackwell. Lewis, Mervyn, Grimsey, Darrin. 2007. Public Private Partnerships. Edward Elgar Publishing. Link, Albert N. 2006. Public/Private Partnerships. Birkhauser. OECD. 2008. Public Private Partnerships. OECD Publishing. Osborne, Stephen P. 2007. Public Private Partnerships. Taylor & Francis. Robinson, Herbert. Carrillo, Patricia. J. Anumba, Chimay Patel, Manju. 2010. Governance and Knowledge Management for Public-private Partnerships. John Wiley & Sons. Sadka, Efraim. 2006. Public-Private Partnerships. International Monetary Fund. Sapte, Denton W. 2006. Public Private Partnerships. Euromoney Books. SCAG. 2011. ‘Public private partnerships – Case study Los Angeles Metro’s Compressed Natural Gas Fueling Facilities.’ SCAG. Retrieved on February 20, 2011: http://www.scag.ca.gov/transit/pdfs/presentations/rttf111506_PPP.pdf Yescombe, E. R. 2007. Public Private Partnerships: Principles of policy and finance. Butterworth-Heinemann. Read More