Public Private Partnerships Essay

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PPP

One of the newer concepts in public policy is the idea of the public-private partnership, or PPP. Essentially, PPPs are when the government works with private enterprise on a project. Public projects tend to be those that benefit society as a whole, and traditionally governments as representatives of the people have been the drivers of such projects. Private enterprise has often specifically avoided many types of projects because of the financial or operational risk involved. A public-private partnership is a form of development where government and private enterprise share the risk and capital expenditure in a project. The split will be different for every project, but it often involves the government taking on some risk in order to facilitate the project moving forward, on the principle that the project moving forward is in the best interests of the general public. In some instances, the government utilizes public-private partnerships to facilitate major infrastructure projects that the government does not want of finance alone, particularly if there is low appetite among the public for new debt (Sharma & Bindal, 2014).

Advantages & Disadvantages

In theory, a public-private partnership is a meeting of the minds with respect to two parties that would not participate in a given project on their own, but when working together the project becomes viable.

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So the advantage for both parties is that the project goes forward. The government's interest is typically social in nature while the private enterprise interest is profit. The latter point is self-evident by definition of private enterprise, but for government there is often some question about whether it receives anything other than theoretical benefit. One theory is that if government finances an asset, it will be able to do so at a lower borrowing cost than private enterprise, but then the private partner will operate the asset, which in theory will be more efficient. Thus, the PPP will deliver economic efficiency while lowering the cost of capital (Nisar, 2007).

The main disadvantages lie in the governance, or at least the perception of governance, in PPPs. There are risks that the governance of a project is out of public hands, even while the public still bears some of the risk. Further, government can use a PPP to reframe a pet projects -- stadiums are popular -- in such a way that the public is exposed to risk without approving the risk. The PPP is therefore an end-around to public governance that government uses in order to ensure its projects move forward, the actions of government quite contrary to its rhetoric (Wettenhall, 2003).….....

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