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The transition towards a sustainable Public Private Partnership regime

The transition towards a sustainable Public Private Partnership regime

Governments across the world are increasingly embracing the use of Public Private Partnerships (PPPs) to deliver infrastructure services.


In part, the rationale for the use of PPPs is the need to buffer public finances with investment from the private sector, in order to create or refurbish infrastructure assets.

In addition, the private sector is expected to bring in innovation and efficiencies in service provision.

However, the success of establishing PPP regimes has differed substantially in different countries. For example, programmes in the United Kingdom and British Columbia (Canada) saw exponential growth after they were introduced; the PPP programme in the Netherlands has been much more incremental; the Victoria (Australia) and Gujarat (India) programmes have had more linear patterns; programmes in South Africa and certain Indian provinces (for example Karnataka) have stalled and stuttered; and in Austria the PPP development never transcended the pilot phase.

“Often policies and frameworks only evolve in response to failures in the pilot schemes, as has been the case in South Africa,” says Dr Stephan Jooste3, a Civil Engineer and specialist PPP consultant at Aurecon. “All too often, governments still believe that implementing new schemes and procedures will lead to successful projects, particularly if they mimic the successful PPP regimes in other countries. What they do not realise is that changes in the landscape level usually take place extremely slowly. Our research (conducted in association with Geert Dewulf 1 and Ashwin Mahalingam2) concluded that it is virtually impossible to transplant PPPs across regions. Innovative ways must be found to tailor PPPs to their local environments.” 

Surveying global PPP progress


PPP environments in nine different locations were investigated to ascertain how the enabling fields in these environments compared with each other and influenced the success or failure of the programmes. This included the following cases: the UK, Victoria (Australia), British Columbia (Canada) Gujarat and Karnataka (India); the Netherlands, Portugal, Austria, and South Africa.

The transition towards a sustainable Public Private Partnership regimeThe survey revealed similarities in procurement schemes, tender procedures, and contractual frames. However, great variety was found in the acceptance of PPP, motives and ideology, capacity, development rate, and the role of institutions4. These differences have translated into varying outcomes of PPP regimes.

The research showed that the main barriers for sustainable PPP policy include the following:

  • Uncertainty (and ambiguity) regarding PPP Policies
  • An absence in the flow of PPP projects
  • A sudden regime shift and lack of political stability
  • An absence of mechanisms that support PPP implementation

Two approaches to PPP regime formation


Based on these findings, it is proposed that there are two broad approaches to the emergence of PPP regimes. On the one hand, there are regimes directed by an ideology that opposes the Public Sector with the Private Sector, where outsourcing is pursued with the aim of increased efficiency. These regimes seek to impose institutional structures that mimic international best-practice, with the hope of attaining similar success. 

On the other hand, there are cases where the underlying ideology builds on a greater trust between Private and Public actors in the form of collaborative delivery. For this reason, these regimes place less emphasis on institutional rules and structures, and rather pursue a customised and holistic approach which includes the development of capacity in both the public and private spheres. Our research suggests tentative support that the latter approach leads to more successful and enduring PPP regimes.

Strategic Niche Management: A helpful theoretical lens


To describe the transition pathway towards a mature PPP policy, the concept of Strategic Niche management (SNM) can be adapted. SNM is a concept from business management literature describing system transition.

The figure below shows a diagrammatic representation of the SNM structuration process.  

A diagrammatic representation of the SNM structuration process

As demonstrated in the diagram, innovation (i.e. the introduction of PPPs) takes place in niches or experiments. These niches, characterised by much freedom and few regulations, are perceived as ‘learning’ pilot projects. Institutions act as enablers or barriers to the success of these pilots.

Whether these pilots will lead to a sustainable and mature policy will then depend on the extent to which these pilots can be aligned with the existing socio-economic landscape. Over time, the niche will impact and even direct changes in the socio-economic landscape.  A major factor here is the success of early projects, as this has a strong impact on the change process.

Conclusion


Many governments still believe that implementing new schemes and procedures will lead to successful projects, but often they do not realise that changes in the landscape level usually take place slowly over decades. The survey of the development of PPPs in the various countries outlined in this article reveals that cultural, political and economic circumstances may hamper or speed up the emergence of PPP. A holistic and innovative approach is required to align structures with the specific situation of each country.

1. Professor of Planning and Development and Head of the Department of Construction Management and Engineering at the University of Twente, the Netherlands.
2. Assistant Professor, Building Technology and Construction Management Division, Department of Civil Engineering, Indian Institute of Technology, Madras, India.
3. Civil Engineer and PPP Specialist Consultant at Aurecon, South Africa.
4. The first PPP projects were motivated by the increasing budget constraints in most countries. Policy programmemes back then were primarily concerned with outcomes and thus laid great emphasis on efficiency. Little attention was paid to supportive mechanisms enabling the engagement of private partners. The fast emergence of PPP in the UK could only happen because the socio-technical regime changed drastically in the early nineties. Similar arguments can be made for the successful emergence of PPPs in Victoria and British Columbia.


This article is based on extracts from the paper ‘The transition towards a sustainable PPP regime’ authored by Geert Dewulf1, Ashwin Mahalingam2 and Stephan Jooste3, which won the ‘Procurement Theme Best Paper Award’ at the Joint CIB W070, W092 and TG72 International Conference 2012, “Delivering Value to the Community” held during 23-25 January 2012 at Cape Town, South Africa.

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