Part 1: Introduction

Managing the implications of public private partnerships.

Our 2006 report, Achieving public sector outcomes with private sector partners, discussed ways the public and private sectors could partner with each other, including public private partnerships (PPPs). Commenting on the principles for encouraging good public sector governance when partnering with the private sector, page 8 of that report noted:

Public entities are ultimately accountable for delivering public services, which is a responsibility they cannot transfer to the private sector. The public entity must have robust internal arrangements in place for deciding to opt for a partnering approach, and for managing its implementation. There will need to be strong leadership from the top of the organisation to drive the process and ensure proper accountability and control. There should be a clear definition of roles and responsibilities, identification of relevant authorities and delegations, and adequate arrangements for public scrutiny of performance under the contract.

The 2006 report outlined three key risks to a public entity adopting a partnering arrangement:

  • poor performance by the private sector party affecting the public entity's ability to deliver core or essential public services;
  • a possible change of government resulting in a policy change that might affect the partnering arrangement; and
  • poor managing of contracts.

What has changed since 2006

The cost of providing public sector services has become a major focus worldwide. Potentially, partnering (particularly PPPs) is one way to manage these costs more effectively and efficiently. Compared with collaborative (joint) procurement practices, which are expected to deliver "the same for less" in the short term, PPPs offer the potential to deliver "more for the same" in the long term.

Partnering arrangements have been used to deliver public sector services for some time but compared with Australia, Britain, and Ireland, PPPs have been used sparingly, with little co-ordination or organised guidance.

In 2008, the Government's announcement of its infrastructure policy and support for the use of PPPs changed this. Cabinet agreed to use PPPs to build infrastructure and support them in a more centralised and formal way (see paragraph 2.25). This raised the profile and potential extent of PPPs in the public sector.

The audience for and scope of this discussion paper

We have written this discussion paper to inform public sector leaders and decision-makers considering partnering with the private sector about the general features of PPPs and the factors that are seen as important in sustaining an appropriate "enabling" environment for all PPPs.

This paper builds on our 2006 report, discussing PPPs as part of a partnering spectrum that is being used to respond to the future costs and needs for public services. We explore how PPPs are being used to capture innovation and change by sharing the risks and responsibilities in performing a particular public service.

As the public sector looks to expand its use of partnering arrangements, we need to learn from our own and others' experiences about the innovative responses that PPPs are expected to generate. Better understanding about PPPs and their place in the partnering spectrum will help agencies more effectively and efficiently respond to the changing needs of the public sector. The paper is supported by:

  • international observations and literature about PPPs;
  • the experiences of public and private sector participants; and
  • a review and analysis of this country's PPP market.

The paper does not:

  • provide an audit or review of any individual PPP activity or associated entity;
  • advocate the use of PPPs as an instrument of public policy, or conclude on the success or otherwise of a particular PPP or PPP policy; or
  • audit or review the structures, mechanics, or economics of PPPs.
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