The Promise and Perils of Public-Private Partnerships

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Mehmet Yesilbas and David Kanaan
April 17, 2015

Complex externalities like globalization, economic instability or political conflicts may endanger the capability and efficiency of today’s governments. Public-private partnerships offer an alternative for addressing government’s lack of capacity or to help maximize economies of scale. The private sector provides a tempting alternative to direct government, however many factors should be considered.

The proliferation of public-private partnerships (PPP) has sparked much debate. In Lester Salamon’s 1989 book, Beyond Privatization, he suggests that third party participation or privatization is a direct attack on government. Additional studies like Frederickson and Frederickson’s Measuring the Performance of the Hollow State, Kettl’s The Tools of Government: A Guide to the New Governance and Stoker’s Governance as Theory: Five Propositions, further suggest that the movement away from government providing direct services sets the stage for poor accountability, gross corruption or worse. On the other side of the argument are those who contend that less government is an opportunity for “increased transparency, responsiveness and citizen participation,” according to Carolyn Heinrich, Laurence E. Lynn Jr. and H. Brinton Milward in their 2009 study, “A State of Agents? Sharpening the Debate and Evidence over the Extent and Impact of the Transformation of Governance.” It is suggested that empirical evidence and analysis can better answer the question of equity. Pragmatic opportunities are included in the World Bank Worldwide Governance Indicators.

What about privatization efforts undertaken during the recent conflicts in Iraq and Afghanistan? Should the malfeasance and exploitation associated with these efforts negate third-party participation?  The prudent reader understands that those situations may be symptomatic of poor governance and poor planning. Third party fraud, waste and abuse can be avoided if more stringent accountability measures are constructed early in the partnership process.

Resource dependency theory tells us that an organization does not control all of the resources it needs to survive. It must depend on other organizations to obtain essential resources, as explained by Jeffrey Pfeffer and Gerald Salancik in a 2003 study, “The External Control of Organizations: A Resource Dependence Perspective.” A previous column highlighting the doctrine of the Copenhagen Center notes “no single actor, public or private, has the all-encompassing knowledge, overview, information or resources to solve complex and diversified problems alone.”

As public private partnerships require acceptance of dependence among the participating organizations, the rationales that underline PPP should be explicitly outlined.  They are:

1. Minimizing government expenditure.
2. Benefiting from private sectors’ abilities and opportunities.
3. Reducing the risk of government investment.

Further, elements for an effective PPP include:

• Expectation of a long-term commitment.
• Genuine cost-sharing.
• A high degree of trust and coordination.
• A commitment to a higher quality of service.
• A commitment by the private partners to educate or train the public partners.
• Flexibility/innovation in service delivery.

When these elements are met, PPP is more likely to achieve its intended purposes, provided prudent parameters have been operationalized.

Salamon outlined the challenges that confront public-private partnerships and third party participation. First, pluriformity where the actors or organizations have limited experience in cooperating with each other; second, self-referentiality, where each actor has different interests and approach the relationship with a different perspective; third, asymmetric interdependence, where all the actors may have different urgency and approach the problem in a different way and fourth, dynamism, where all the features may change over the time even if the network carries out its mission. The diversity of these elements emphasize the need for creativity and skills in measuring the success of a public-private partnership.

Resolving conflicts between organizations with different objectives is difficult but necessary, especially if an explicit hierarchal structure is missing. Arriving at a common objective among multiple organizations with diverse cultures and perspectives is not organic. It requires skill. Mediation and collaboration skills are key to mitigating problems.

The PPP phenomenon mirrors decentralization efforts in the United States during the latter part of the 20th century. Preferring broad goals and grant funding, the federal government handed off numerous social welfare essentials to state agencies. Similarly, state governments closed many large institutions, mental health facilities for example, and deferred operation to local and regional NGOs. One might argue that the trend toward third-party government, including the private sector, was a natural progression of this dynamic.

However, government cannot defer its role. There must be diligent efforts and robust controls put in place to counter corruption. And this must be part of the discussion from negotiation through implementation. Failure to do so neglects the spirit of the new governance paradigm.

Robust third-party participation, especially for-profit privatization, favors cogent restraint. Removing direct government participation in service delivery heightens the risks of inequity, corruption or worse. One of the best examples are international bodies who have injected firm mandates for vigorous performance measurement, transparency and accountability mechanisms for all policy participants.

Mehmet Yesilbas, Ph.D., MPA, LL.B is a District Governor, Attorney at Law and Deputy Head of EU Affairs & Foreign Relations Department, Turkish Interior Ministry, Graduate Teaching Assistant of at University of Central Florida, Doctoral Program in Public Affairs, Governance and Policy Research Track. Mr. Yesilbas can be reached at [email protected].

David Kanaan, MPA, CNP, is a former marketing executive and current Graduate Teaching Assistant at the University of Central Florida, Doctoral Program in Public Affairs, Governance and Policy Research Track. Mr. Kanaan can be reached at [email protected].

 

 

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