This unique partnership relationship between the public and private organizations sets public/private partnerships apart from other forms of privatization in the service delivery sector. The partnership, as the name implies, is a cooperative venture between the public and private sectors. It is designed to allocate resources, risks and rewards between the two sectors according to their strengths and expertise. The respective strengths of each partner are used to offset any weakness of the other partner.
The value of public/private partnerships is enhanced by the social benefits resulting from programs being delivered earlier than would have been possible by government alone. The long-term partnership relationship also allows government to pursue initiatives which may not otherwise have been possible without the partnership. For example, infrastructure gets repaired, clean water is provided, etc. through the use of private funds and is paid for as an operating expense. Service is available for the public's use now rather than later or not at all because funding is not available.
A public/private partnership is just that, a partnership. Therefore it must be a win-win situation for both organizations, and both must be satisfied. Thus it is important that public private partnerships have the following characteristics.
- Cooperation to produce a commercially viable solution which results in a cost-effective outcome for government and the community.
- A transparent process that will withstand public scrutiny.
- A competitive proposal process to share risks and rewards equitably.
- Proposal requirements that permit proposals to be prepared at a reasonable cost.
- Consistent integration with government's strategic plan.
A public/private partnership will usually have a major impact on the local economy because of its high capital cost and relatively long operating life. It requires sound ongoing management and maintenance. A properly structured partnership provides assurance that the facility and or service will continue to meet changing circumstances in an effective and efficient manner. Both sides must show receptivity to innovation to allow the partnership to adapt to changing community needs, regulatory requirements, and technology advancements over the life of the enterprise. Well-designed public/private partnerships let the private sector use its skills and resources; in return, the private sector expects to earn a reasonable return on investment and associated risk.
Not every situation is suitable for a public/private partnership. To be considered for a partnership, a project should have most if not all of the following characteristics.
- There is an identifiable commercial opportunity.
- The whole life construction and or operational cost of the project can be reduced by private sector involvement, and efficiency savings can be shared with the government.
- There will be a strong and reliable revenue stream throughout the life of the project.
- The government does not have to own or operate the infrastructure.
- The private sector is able to provide the project or service in accordance with government strategic plan requirements.
- The private sector has the latest technology and best management practices available for use on the project.
- The government's capital funding requirement for the project will be reduced.
The preparatory stages in the overall process are of critical importance. They establish the need for the project and the estimated cost. They also identify the benefits and risks of the proposed partnership and how these will be allocated between the respective participants. This stage will also establish the basic parameters for the project and the probability of acceptance by the community.
The process that should be used to guide government's approach to public private partnerships must proceed through several stages of decision making. This progressive approach will enable the government to assure that the benefits to the community have been identified and maximized. A competitive solicitation process will be used in all cases. The preferred solicitation type is a two step process with an initial request for qualifications and a subsequent request for detailed proposals from the short listed firms.
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