PPPs are designed to achieve improved access to assets, infrastructure and services over a significant number of years. They should have clearly identified objectives, specified outcomes, clear programs of investment over time, and relationships and performance targets to bring to life the Social and Economic Value Equations that underpin them.
As stated in my previous blogs, the Social and Economic Value Equation is:
Increase in value for money from the commissioning and provision of assets and public services
This is why clear objectives are so important.
+ Increase in community wellbeing
= Change in the economic and social value achieved
Take for example the provision of a road. The objectives for the provision of a road are to provide more economic, efficient and effective access to and for places, people, markets and services. A new road has economic, community and social benefits.
The provision of a school is to achieve more economic, efficient and effective access to education to improve the life chances, health and well-being of individuals and to improve the economic potential and success of people, organizations and places.
The provision of roads and schools, as well as all assets and infrastructure, should be part of a strategy to achieve the strategic objectives for places and communities. This is an important distinction.
Objectives are what the organization is seeking to achieve, and strategy is how its objectives are to be achieved. The objective might be to improve the economic success of a community with the strategy being, in part, the provision of a new road to improve connectivity with markets and the attractiveness of a place for inward investment.
It is important to recognize that PPPs for the provision of assets and infrastructure are only part of the strategy to achieve the objectives for places and communities. Improving the economic success of places and communities has many aspects to the strategy to achieve it. The challenge for leaders and managers is to ensure that the linkages between different elements of the strategy are identified and put into place.
It is important not to get lost in the PPP process for the provision of assets and infrastructure and to lose sight of the real objectives for their provision. This is why the Social and Economic Value Equation is important and useful in developing PPPs.
As products cannot exist and fulfil their potential without services, neither can assets and infrastructure exist and fulfil their potential without services to support and to enable their use. A new school building will not guarantee a transformation in the educational attainment of the students that use it. A new water treatment plant will not transform people’s lives if the filtration mechanism keeps breaking down due to it not being maintained.
A strategic context for places and communities needs to be created into which proposals for PPPs can be placed. In this way, PPP proposals can be seen as part of a strategy to address strategic objectives rather than them becoming an objective in their own right. Without a strategic context, PPPs become limited to being operational projects and their potential to transform the Social and Economic Value Equation is constrained.
The creation of this strategic context requires strategic thinking and the willingness and ability of leaders and managers to clarify strategic objectives, identify priorities, allocate resources and to see PPP projects not as ends in themselves, but as part of an interconnected program of investment in assets, infrastructure and services. It requires a long-term vision and commitment.
While individual PPP projects might be managed by a single organization or part of an organization, the thinking and action to initiate and support them needs input from many organizations. Building a new hospital and merely transferring the current services into a new building will not guarantee an improvement in services and health outcomes. The building is merely part of the process for transforming service quality and outcomes. What happens in hospitals is part of a system of preventing illness, intervening in illness, and post-hospital care. The provision of a new hospital is but part of the strategy required to improve health outcomes. PPPs need to be seen within this strategic context.
In recognizing this reality, it is important that organizations respond to the challenges of managing a portfolio approach to the achievement of strategic objectives. PPPs are likely to be only one element of the portfolio approach required to achieve the provision of, and realize the potential from assets, infrastructure and services. Public sector managers need to be portfolio managers. They need to be able to manage different types of relationships for direct asset/infrastructure/service provision by their organizations, for the provision of assets/infrastructure/services through PPPs and for joint working with other parts of the public and private sectors.
This is a demanding cocktail of requirements and provides a leadership and managerial context for PPPs. Where the willingness and ability to respond to these requirements doesn’t exist, the strategic context is underdeveloped and the linkages between PPPs and the input from the public sector necessary to realize the full potential of PPPs are not present. This creates a barrier to the transformation of the Social and Economic Value Equation. PPPs become discrete projects and they do not fulfil their potential to transform places and communities.
Developing the knowledge necessary to pursue PPPs as projects is important, but it is equally important that public sector managers develop their strategic thinking and are able to put PPPs within a strategic context. PPPs should be part of transforming the economy, efficiency and effectiveness of public resources. They will only do so if they are seen as part of an interconnected system of pursuing strategic objectives.
To achieve this requires a move to Public to Public Partnerships (P2P Partnerships). Joint working within the public sector needs to be transformed (see previous blogs on P2P Partnerships). Only in this way will the strategic context and approach to PPPs evolve effectively to fulfil their potential to address strategic issues, and will PPPs be able to move from a project focus to being part of a strategic solution focus.
It is also the case that the private sector needs to be encouraged to move from a project focus to a strategic solution focus. This means that the public sector needs to develop PPP opportunities that have a wider scope and scale within a clearly defined and articulated strategic context.
If the private sector is to be able to respond to these opportunities it will have to be committed to achieving the public sector’s strategic objectives, to move from a transactional relationship with the public sector to one based upon partnership working, and to develop Private to Private Partnerships (Pr2Pr Partnerships).
Pr2Pr Partnerships will be the subject of my next blog: PPPs and PALS.
Disclaimer: The content of this blog does not necessarily reflect the views of the World Bank Group, its Board of Executive Directors, staff or the governments it represents. The World Bank Group does not guarantee the accuracy of the data, findings, or analysis in this post.