Public to Private Partnerships - Essay Example

Public-Private Partnership Public-Private Partnership Introduction Public-private partnership refers to a government service or private ventures financed and operated through partnership of the central or federal government and one or more private sector companies. Therefore, the public-private partnership is an official contract between the public and the private companies. In the contract, private company renders specific public services that attract huge technical and financial risks. In certain types of contracts, the cost of using the services provided by the public-private partnership are borne wholly by the users. In other circumstances, the cost is borne by the taxpayers (Tunčikienė, Grenčiková, & Skačkauskienė, 2014). In other cases, the cost of the investment is borne exclusively by the private investor during the contract with the government on the provision of the specified services of public interest while the total cost of the project is borne by the government. The government may also provide initiative that attracts various investors into a specific venture aimed at the production of goods for public consumption (Vinogradov, Shadrina & Kokareva, 2014). In this form of contract, the government provides capital subsidies to the private company, such as the one-time grant to make the venture economically attractive. The government may as well provide the private partner with various revenue subsidies such as tax break as well as the removal of other guaranteed revenues for a particular period (Smith, 2008). Public Private Partnership operates under two principal drivers. First, the public-private partnership (PPP) enables the public sector through the intervention of the government to optimum harness the expertise and various specific efficiencies of the private sectors. Such contracts entail the provision of certain services and delivery of particular facilities initially carried out by the public sector. Secondly, the PPP protects the public sector in making borrowing during the process of delivery of certain services of public interest. Instead of public borrowing, the private sector incurs all the cost of the project and is involved in the solicitation of the project capital on behalf of the public sector. Privatized Prisons in Florida Privatization of the prison in Florida State is an epitome of a public-private-partnership. As with other PPP, the privatization of the prison majorly operates on two principal drivers. These include the harnessing of the private ventures expertise in prison management as well as cushioning the public sector from financial strains involved in the financing of the prison services (Tunčikienė, Grenčiková, & Skačkauskienė, 2014). Florida Department of corrections, which ranks third nationwide, has been experiencing constant expansion rate backdated to 1973 when the federal government took over the correction department management. Due to the ever-increasing number of the prisoners, there have been concerns on the overcrowding problems and poor confinement conditions. There was a significant dilemma over the prison population boom in the 1980’s and subsequently the court-ordered control on the number limit of the prisoners in these federal prisons (Smith, 2008). Prisons operational cost is relatively very expensive. In this regard, a private company identified the niche and presented a business plan to reduce the cost. The Florida lawmakers started the process of prison privatization in 1993 following the proposal of the private company. Chapter 57 of the Florida Statutes provided an authorizing legislation in respect to the matter. It allows for the privatization of the State operated prisons to be managed by the profit-making firms. The law speculated that, in regards to the paradigm shift, there were an expected 7% savings by the prison department when compared to other public institutions of the same capacity. The realization of savings from the state expenditure on prison department is never a reality. Currently, Florida has seven prisons that operate privately. Four of such prisons are under the management of Correction Corporations of America (CCA). MTC operates one while the GEO group operates two prisons. In total, approximately ten prisons in Florida are in the control and management of the private venture firms. Presently, Florida Senate continuously lobbied for privatization of more prisons up to 29 prisons from the current 10 prisons under privatization. The Florida State, in 2011, cut the budget of all the state agencies. Florida Department of Correction (FDOC), however, resisted the move and claims that the initiative was sensitive to the public interest and that laying-off many guards was detrimental to the security of the state a whole. The proviso by the senate required that the FDOC privatize about 29 prisons, work release centers and annexes that house 16,000 prisoners in 18 South Florida State. The privatization was supposed to take full implementation by January 2012 (Osborne, 2010). The privatized prisons in Florida, based on the principals of the Public-Private Partnership, had a clear objective of relieving the public sector of the huge expenditure and other accrued inefficiencies in the management of the of the prison. Such private companies such as GEO and CCA provided an efficient means in the management of the prisons in comparison to the Florida Department of Correction. The PPP agreement could carry several benefits especially those centered at relieving the pressure on the current correction facilities in Florida (Osborne, 2010). Problems Associated with Public-Private Partnership Several problems are associate with the private-public partnership as seen in the privatization of the Florida Prisons. Some of the problems associated with PPP include: Higher Cost of Operation Initially, the PPP was claimed to be less costly in comparison with the direct involvement of the public sectors in the provision of the particular services. However, currently, many advocates of such partnership admit that it is not cost effective in any way. The sole significance of such partnership is the transfer of massive risks from the public to the private sector. For instance, in the privatization of the Florida prisons in 1993, the key economic plan was to reduce the expenditure on prisons by about 7%. However, this postulated savings since the start of the privatization is still to be realized. Advocates of the partnership claim that the higher cost of PPP including financing aspect remains offset by transfer of massive risks to the involved private sector. The public sector is, therefore, in this regard, protected from higher risks of capital lose in the process of provision of such services like Correction services by the prisons (Tunčikienė, Grenčiková, & Skačkauskienė, 2014). Lack of Guarantee of Risk Management In most of the Public-Private Partnership, the main factor in consideration is the risk transfer risk from the public sector to the private sector. There is, however, no universal prove that the private sector possess the necessary economic and technical prowess in managing such risks than the public counterparts. Converse to the common belief, the PPP proves to be riskier and more expensive compared to the public sector sole involvement in the provision of services of public interest. In regards to the Florida Prison Privatization, there is no authentic evidence that the private sector involvement could effectively reduce the risk of managing the ever-expanding prison population. Such companies as GEO alongside other private companies provided no full direct protection from the risks of prison management. The PPP is riskier and less effective to some extent in comparison with the traditional procurement through the public sector. The PPP fueled, in recent time with other desire of economic gain by a few individual, contrary to the popular belief of its general relevance to the risk management Vinogradov, Shadrina & Kokareva, 2014). Corruption Claims The Public-Private Partnerships in most instance involves numerous corrupt deals and transactions. There is mostly backdoor policy facilitated by the authorities throughout the process of the partnership. Starting with the tender allocation or call for partnership with the private firm, to the management of finance and all other processes are all corruption filled and not transparent. A critical analysis of the Privatization of the Florida Prison reveals corrupt involvement in the partnership. Even as Florida tends towards privatization of almost all its prisons, GEO Group remains the favorable bidder in the process. Other potential bidders such as CCA may fail to win the bid due to corruption. Records indicate that Florida GOP received as much as 1.5 million US dollars from the GEO Group. The corrupt dealings between the private and the public sector are on the rise especially with the emergence of the privatization processes. Political Fallouts Public-Private Partnership is a major cause of political fallout across the globe. While others advocate for the implementation of such policies, others gangs against it, with claims of protecting the public interest but more often in protecting their interests. For instance, the Privatization of the Florida Prisons brought political fallout between Governor Scott and political rivals who were against such notions during the past election. In recent times, there is an increase in political friction between the two opposing sides in the political arena. Such political disagreement lowers the efficiency if any, of the private sectors performance inn such kinds of contracts. The PPP faces several other problems that result to poor performance and outcome of the partnership. Without due strategies to navigate the problems facing the Public Private Partnership, there is bound assurance of failure from such venture and high capital wastage. Recommendation for Remedies of the Problems Various recommendation can face-out the problems that are currently facing the Public-Private Partnership. Such recommendation offers a long lasting guideline of the legal and constitutional means of establishing the partnership with the aim of reducing the tensions and confusions that arise from the engaging in such kinds of partnerships. Some of the recommendation may include: Constitutional Review on the Public-Private Partnership There is a need for a proper constitutional review on the legal provisions relating to the establishment of the partnerships in both current times and future. For instance, in the case of Florida, there is need to review further Chapter 57 of the Florida Statute to include the finer details of the partnership. As of the contemporary time, the key factors in consideration are the ability to transfer effectively the risk involved in the provision of public services to the private sector. With the rising concerns about the inefficiency of the partnership, there is need to review the relevant Acts that will provide a more strict selection criterion for the private partner involved in the whole process (Swanson & Smith, 2013). The absence of such stricter legislations provides a niche for cartels and corrupt government officials to facilitate corrupt deals with the private firms and bar other qualified firms from participation. Such Legislation should as well provide the expectation of the public on the quality of services offered and the cost effectiveness of such the partnership. Controlling Corruption Corruption forms a major threat to the success of the public-private partnership. There is the need to control the cash flow from the public to the private sector through strict accountability on the transactions involved in the partnership. The Auditors should access fully and scrutinize all the available records that relate to the partnership in question. Through various strategies to control corruption, a proper and transparent bidding procedure in place to ensures just selection and regards to all the bids forwarded. In the current situation, there is the lack of transparency in the partnership process, and this leads to unfair rewards of bids to undue private companies in the presence of other better alternatives (Vinogradov, Shadrina & Kokareva, 2014). Setting Clear Objectives for the Partnership The principal objectives for most PPP are the transfer of risk to the private players and improving the capital efficiency of expenditure on the public services and facilities. In many scenarios, the public sector does not develop objective goals and standards on how exactly their expectations are to be met by the private counterparts. Development of clear and comprehensive objectives for the partnership is necessary for a better performance of the partnership (Swanson & Smith, 2013). It also provides a standpoint for the evaluation of the performance of the private company and its relevance to missions of the partnership. Through the development of partnership objectives, the service delivery efficiency, and financial accountability improves in the process. Therefore, the State should select a special committee in the Senate to oversee such processes to enhance the performance of the PPP (Swanson & Smith, 2013). Best Practices for Public- Private Partnership A few practices facilitate the efficiency of the PPP. Among such best practices involves; Demand controlled and specificity of Response to the Need of the Industry and General Society The best PPP focuses on the particular current demands of a specific industry and society and responds to such demands accurately. The organization must timely address the contemporary industrial and societal issues that affect a given area. To stay relevant to its role in either industry or the society, the partnership should continuously evolve to refocus its strategies on the emerging issues (Hodge, Greve, & Boardman, 2010). Long Term Perspective and Flexibility in Gauging Success Like any other business organizations, the public-private partnerships must establish a specific standard and gauge itself against such standards of success to evaluate its success over time. The partnership aims at bridging the gap between the government and the private sector to ensure quality service delivery and effective capital usage. Device Alternative Sources of Revenue beyond Tax money and the government There is need of such partnerships to develop other sources of capital and avoid over-reliance on the on the government money. The multiple sources of finance offer the reliability of capital inflow and the ability to respond to the dynamics of the market forces. Core Structural Integrity Most public-private partnership displays unquestionable integrity in the matters of the intellectual property protection as well as the creation of trust and due credibility. The leading organization brands become synonymous to trust, integrity among other virtues. The organization employs skill based operations that enhance the quality of their services to the public (Hodge, Greve, & Boardman, 2010). An Interview with GEO Group Manager The GEO Group is linked to the possibility of winning the prison privatization tender. George C. Zoley, the CEO GEO Group, remains confident on the relevance of partnership as a means of achieving quality service delivery in the society. He notes that private-public partnership, though having may challenge as like many other ventures, is the future of quality service delivery in the contemporary society. Zoley remains optimistic that the political interferences will give way to the public-private partnership to improve the quality and efficiency of service delivery. Differences between PPP and Service Contracting or Purchases There are key differences between the PPP and service contracting or purchase. First, PPP is a long-term contract that comes with the numerous requirement on the part of the private firm whereas the contracting service is a short-term contract renewed annually. Secondly, PPP requires a relatively larger financial base to accomplish as it involves the provision of services key in the society. The service contracting may require just an adequate capital to operate (Savas, 2005). Thirdly, PPP specifically involves the private sector and the government whereas contracting services or purchase does not necessarily involve the government. PPP is, therefore, a special type of contract with higher financial and technical responsibilities. It operates within a specific legislation that aims at improving the quality of services to the public. References Hodge, G. A., Greve, C., & Boardman, A. E. (Eds.). (2010). International Handbook on Public-Private Partnership. Edward Elgar Publishing. Osborne, S. P. (Ed.). (2010). The new public governance: Emerging perspectives on the theory and practice of public governance. London: Routledge Swanson, David, R., & Smith, R. J. (2013). A Path to a Public-Private Partnership: Commercial Logistics Concepts Applied to Disaster Response. Journal of Business Logistics, 34(4), 335-346. doi:10.1111/jbl.12031 Tunčikienė, Ž., Grenčiková, A., & Skačkauskienė, I. (2014). Development of Public-Private Partnership: Managerial Aspects. Business: Theory & Practice, 15(1), 11-21. doi:10.3846/btp.2014.02 Vinogradov, D., Shadrina, E., & Kokareva, L. (2014). Public Procurement Mechanisms For Public-Private Partnerships. Journal of Public Procurement, 14(4), 538-566. Read More