Public sector organizations seek constantly to improve the Economic and Social Value Equation. The Economic and Social Value Equation is represented by:
Increasingly, improvements to this equation are being sought through Public Private Partnerships (PPPs). These improvements have frequently focused on value for money and not always adequately addressed increases in community wellbeing. The challenge for the future is to achieve transformation of both economic value for money and community wellbeing. This requires a focus on additionality in PPPs.
Additionality in PPPs should be defined in terms of the balance between, and the extent to which, the economic and social value in the Economic and Social Value Equation to be delivered by the PPP is above what the public sector can achieve itself. In identifying what the public sector itself can achieve, public sector managers need to think more widely than just their individual organizations.
This would represent a significant strategic shift in thinking. Traditionally, public sector managers have looked at what they do and what they want to achieve solely through the lens of their own organizations. This has limited their ambition and the opportunities they have to maximize the additionality that can be delivered through PPPs.
If public sector organizations are to maximize the potential additionality from PPPs they need to look first at the potential to create Public to Public Partnerships (P2Ps). This is where public sector organizations work together to identify and realize the potential they have to achieve improvements in economic and social value.
Leveraging the power of P2Ps
In recent years many individual public sector organizations have sought to create PPPs for the provision of similar assets and services. In doing so they have often not sufficiently considered the potential economic leverage of P2Ps with their private sector partners. This fragmented public sector approach, particularly where it is coupled with a lack of competition in the private sector, has reduced pressure on the private sector to innovate. It has enabled the private sector to achieve higher margins, kept public sector administration costs higher than they need to be, and increased procurement costs for the private sector. It has frustrated the realization of the additionality available from PPPs in the context of the Economic and Social Value Equation.
Specifications for assets and services need to be based upon future needs, and not just be an extrapolation of the present or the past. They need to identify and understand why specifications for the same assets and services provided vary so much in different places in the same country. There needs to be a clear understanding of how the different elements of the organization’s value chain, and the value system of which it is part, can be bound together in a P2P to create seamless service provision focused on outcomes, as well as economy and efficiency. This often requires a fundamental challenge to, and evaluation of, the Economic and Social Value Equation required for the future and how this can be improved through P2Ps.
Creating a P2P is not easy and sometimes the pressure of timescales militates against their creation. Similarly, projects for major infrastructure provision may be one-offs and not conducive to P2P creation. In many cases, however, they are possible to create. In any case, the challenges of creating P2Ps should not be allowed to inhibit their development where there is a significant and tangible additionality to be achieved through their creation.
The main barriers to the creation of P2Ps often relate to:
- Perceived challenges to organizational status/sovereignty.
- Concerns about managerial control.
- Political acceptability.
- Organizational cultural differences.
- Inadequately developed organizational capabilities.
- The need to develop different organizational competencies.
- A lack of organizational capacity.
Together, these barriers can be summarized as a lack of willingness and ability to enter into joint working within the public sector.
Economic and social value from PPPs can be significantly improved if the public sector can identify and exploit the potential of creating P2Ps. These P2Ps should challenge the private sector to innovate by delivering additionality over and above what the public sector can achieve within the timeline and resources available.
If the private sector, in seeking to be part of a PPP, can’t or won’t illustrate that they can deliver more than a P2P, then perhaps we’ll see more P2Ps delivering, and not just commissioning, the provision of assets and services.
Read Malcolm's article in the Public Sector Excellence magazine: Supporting Public Sector Innovation
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