Call them taxpayers, citizens, or just simply the public—they are the reason why public private partnerships (PPPs) are created. They are the users and the ultimate financiers, whether by paying taxes or tolls, and they want to have a bigger role in decisions about what infrastructure shall be built and how. It’s no surprise that public opinion is the ultimate judge of the success of PPP projects.
And this ultimate judge is not always just; it does not always have the right information at the right time. It’s up to fallible public sector officials to ensure that proper information and reporting is available to the public and that proper stakeholder consultations take place prior to key decisions regarding the project.
Interestingly, a lot of government officials believe that the huge public interest in PPP projects is dangerous, and they would prefer to use traditional procurement procedures, as these provide the officials a safe haven. But this need for a safe haven can be an obstacle—development is about trying new things, experimenting with innovations, trying new ways to achieve efficiencies, and taking risks.
One of these risks is the cost of procurement of PPP projects. In my experience some of the costs that would normally be classified as capital costs under traditional public provision are classified instead as procurement and advisory costs in the development of a PPP project. This is quite a risk for public officials, but it is risk well justified by the quality of preparation and unprecedented learning process for both the public and private sides of a PPP agreement.
Take, for example, the Partnerships of British Columbia Value for Money report regarding Surrey Outpatient Hospital, which reported that the costs of public sector procurement of this PPP was $9.3 million compared to PSC $4.7 million (Public Sector Comparator is a measurement of public sector costs if the project would not be done as a PPP); therefore, the PPP procurement costs were a double hit to the public budget. And it is not just public officials who take this risk; the private sector side is also making a significant investment in developing proposals that can constitute several percent of the project capital costs.
The above mentioned Surrey Hospital does seems to deliver Value for Money (8.8% on overall costs), and not only have number of reports been published, including the Fairness Advisor Report, but cameras have also been installed directly on the construction site and a webcam enables direct online supervision by the public of how the construction of their hospital is progressing. An excellent idea, is it not?
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