Rethinking Public-Private Partnerships (Greve, Hodge - editors)

Book launch

Copenhagen30 April 2013

Carsten GreveProfessor, Ph.D.cg.dbp@cbs.dk

With introduction by Susana Borrás, Head of Department, DBP and comments from Professor Grahame Thompson, DBP

Overview: A PPP project

Source: OECD. 2008. Public-Private Partnerships. In Pursuit of Risk Sharing and Value for Money. Paris: OECD. p. 41.

HOW WAS THE BOOK MADE?1

Selected papers from IRSPM conferences: Panel on PPP (International Research Society for Public Management) + a few requested papers

Copenhagen

Bern

Dublin

Rome

PPP panel at IRSPM in Copenhagen back in ‘09 The editors

Publication process

2011: Mail to authors:

all said yes

2012: All chapters submitted

2013: Publication of edited volume

Rethinking PPPs

The global financial crisis

and PPPs

Assessing PPP projects and

performances

Strategies for turbulent times

PPPs: Varieties, forms & levels

A: Single project/activityB: Type of delivery mechanismC: Policy D: Governance style/tool/symbolE: Cultural/historical tradition

WHY IS PPP STILL TOPICAL?2

HM Treasury 2012 p. 16

The new “PF2” approach in the UK (report December 2012)“A new approach to public private partnerships’ sets out the Government’s

approach to involving private finance in the delivery of public infrastructure and services through a long-term contractual arrangement. PF2 will;

• Strengthen significantly the partnership between the public and private sector by Government looking to act as a minority public equity co-investor in PF2 projects;

• Ensure that procurement is much faster and cheaper • Improve the flexibility of services introducing periodic reviews of service

provision. • Transform the approach taken to transparency Improve the value for

money of risk allocation in the contract Widen sources of debt and equity finance by;

• Deliver value for money by developing and consulting on guidance which will replace the existing Value for Money Assessment Guidance”

Recent OECD policy guidelines for PPP (2012)“Establish a clear, legitimate and predictable framework supported by competent and well-resourced authorities

Ground the selection of PPPs in value for money

Use the budgetary process transparently to minimize fiscal risks and ensure the integrity of the procurement process”

TURBULENT TIMES3

The European PPP market: Source: European Investment Bank – presentation to OECD conference 2013

Connoly & Wall – chapter 2 –on the impact of the GFC on PPP from a UK perspectiveSignificant improvements are required in

the economic circumstances, together with a greater availability of finance, before PPPs will become as substantial as they were prior to the GFC.

Whilst large amounts of money are still being raised for PPPs, the totals remain considerably lower than they were before the crisis.

A return to what may be termed as normal lending conditions may not be enough to resurrect PPPs as a major means of improving the UK’s infrastructure.

There should be no presumption that continuing the use of private finance at current rates will achieve VFM (NAO, 2010)

Connoly & Wall – chapter 2 on the impact of the GFC on PPP from a UK perspectiveSince the change of government in 2010

is that there is a much greater emphasis on what is appealingly referred to as ‘efficiency savings’ on projects;

The financial sector continues to have a dominant position in the UK economy and thus the role of private finance in infrastructure development is unlikely to disappear.

A shift from bank lending to more market-based solutions such as pension and wealth funds and investment from insurance companies.

Hellowell & Vecchi chapter 3 on the price of equity capital in PPPsInstitutional investors in the UK will not

enter the project finance market unless contracts are modified so as to reduce the risk borne by creditors.

In future contracts, risk will need to be re-allocated from debt-holders to one or both of the other main counterparties: the public authorities and/ or the equity investors.

Eoin Reeves – chapter 4 on the Irish PPP experience

Clear challenges in terms of improving transparency and the extent of information concerning individual contracts that is released to the public and the timing of any such releases.

When considering the need for confidentiality on commercial grounds however, policy makers must recognize that large amounts of public funds are committed to PPPs.

The reach of PPP is extending more and more into sectors that are sensitive in terms of the nature of services involved (e.g. education, health, water and environmental services).

STRATEGIES FOR TURBULENT TIMES

3

Innovation and dynamic processes in PPPs

Innovation and PPPs : Tamyko Ysa, Marc Esteve and Francisco Longo - Spain

The non-profit perspective on PPPs: Anna Amirkhanyan and Sarah Pettijohn - USA

A Foucault perspective on PPP mega projects: Sophie Sturup - Australia

Public management of PPP urban redevelopment projects in US cities: Rob Alexander - USA

Anna Amirkhanyan & Sarah Pettijohn, American University, Washington DC. – Chapter 6 “Furthermore, in the search for the

best approaches to PPPs, we are likely to come to the usual “it depends” conclusion: different institutional contexts, contingencies, and service areas introduce complexities that need to be accounted for in the analysis and understood by the practitioners.”

Anna Amirkhanyan & Sarah Pettijohn, American University, Washington DC – Chapter 6“One promising direction for the future

research on PPPs may involve understanding their diversity and creating typologies that facilitate the future theory building efforts.

Specifically, while much attention has been paid to various service delivery partnerships, some cross-sector partnerships may be focused on advocacy or regulation.

Currently, a large number of nonprofit organizations are involved in advocacy and some form of “shared governance” .They pressure public agencies to satisfy urgent social needs or create collaborative alliances to address those needs”

Rob Alexander, James Madison University, USA – Chapter 8“”Awareness and management of the

broader actor network matters particularly if project success includes measures of satisfaction with project processes. Such measures become more relevant when researchers examine PPP projects in the broader social context of agency relationships over time.

Under the appropriate organizational capacity and market stability conditions, public managers that employ trust-based network management strategies not only achieve desired project outcomes, they also generate positive relationships that extend into the next project, impacting overall perceptions of success.”

An improved PPP model? Can a theory-based approach help?

Beyond the Contract: A theory-based

evaluation of PPP performance(s):

Jeffares, Sullivan & Bovaird – UK/Australia

A theory of the dynamics of

complexity and control in PPPs: Verhoest,

Voets and Van Gestel - Belgium

12 composite partnership principles (Jeffares, Sullivan, Bovaird) – Chapter 91. Purpose is clear, aligned and realistic2. Availability of appropriate financial and human resources3. Clarity of motivations, roles, capabilities and contributions4. Sufficient organisational processes and procedures that foster collaboration5. Alignment of partners and policies6. Commitment, ownership and responsibility of partners towards the partnership7. Partnership is participative and empowering 8. Culture of collaboration trust and openness9. Presence (and awareness) of cultural transformation, synergy, efficiencies or

exchange10. Defines success monitors and reports its performance11. Partnership is continually engaging with others, developing and learning12. Clear attribution of benefits, risks and blame

CONCLUDING REMARKS RETHINKING PPP

4

Trends in PPPs

From bank finance to mixed finance and finance from

other sources

From Europe to Asia and possibly

North America

From primary deals to

secondary market and M&A

Further questions

Risk sharing: Who takes

on the risks?

Financing: Where is it

going to come from?

Governance: Have

governments learned how

to govern more

efficiently?

Policy: How do

governments create a

robust PPP policy

framework?