It’s more than just for money
As Xpert Michael Keating’s recent blog noted, state and local revenues are increasing, resulting in a better fiscal picture for many local governments. Yet at the same time, the number of public-private partnerships (PPPs) continues to grow, even with the improvements in local government budgets.
If the financial squeeze on cities and counties in lessening, why is the use of PPPs continuing to grow?
The answer is that it’s more than just the money from alternate sources that makes PPPs increasingly attractive. The backlog of maintenance and growth in populations creates a demand of projects that need to be done. These can still exceed the budgetary capabilities of many localities.
While partnerships can’t answer all of these challenges, the use of this innovative development tool can allows for some relief from budgetary constraints, in addition to provide a host of other benefits. And as a result more (that is, other projects as well) can be done to meet public needs.
While finances continue to be a factor in PPPs’ growth, what is more important is the growing number of successful PPPs that provide examples of innovative ways of meeting some of those needs. While the press often covers the billion dollar transportation projects, the number of smaller projects that have relevance to local needs are increasingly become better understood and known. The result is that there actually are more of these smaller projects (both in number of projects and total dollars involved). These projects can be schools, parking facilities, courthouses, hospitals, water/wastewater systems, or a wide range of other public buildings.
Many governments are now seeing the additional advantages of PPPs. One of the most notable is the transfer of construction risks to the private sector. Under the traditional procurement process of public design/bid/build, if construction problems occur, the risk is predominantly with the public sector and can be very costly.
With a properly structured PPP, much of that risk is transferred to the private sector. We’ve all heard stories of cost overruns and delays with some projects done in the traditional design/bid/build approach (the most infamous being the “Big Dig” in Boston), but have you heard about successful completion (i.e. on time and under budget) of PPP projects? They’re out there but often not widely reported.
Another advantage is the innovative approaches that the private sector can bring to a particular project. Part of the development of a PPP is the competition for the design of a project. Often the private sector provides imaginative ways to more effectively meet the needs and performance goals of a given project (that’s part of the competitive process in partnership development bidding). Alternate sources of income, more cost effective use of available space, greater energy efficiency and ways of meeting a broader range of public needs can all come out of the PPP development process.
Unfortunately, there is not a national databank of those smaller projects. In future blogs I’ll touch on some of them and their innovative answers. In the meantime, let me know if you know of examples worth sharing with our broader audience – or have questions or comments.
Richard Norment served as the Executive Director of the National Council for Public-Private Partnerships (NCPPP) until his retirement in January, 2014, and now is an Independent Consultant for Public-Private Partnerships.