Public-Private Partnerships—What’s the right size?

July 2008 » Columns
Last night, as I sat in my rain-drenched Corolla advancing a foot to two feet a minute during rush hour, pending the advancement of a local road/bridge rehabilitation crew, the thought crept up once again: "There’s gotta be a better way to address infrastructure needs!"
Cathy Bazán-Arias, Ph.D., P.E.

Last night, as I sat in my rain-drenched Corolla advancing a foot to two feet a minute during rush hour, pending the advancement of a local road/bridge rehabilitation crew, the thought crept up once again: "There’s gotta be a better way to address infrastructure needs!"

Of course, the good ol’ funding strategies to address infrastructure needs vary by experts, location, country, etc. However, the more I research, the more I’m becoming an advocate of PPPs.

It is generally understood that Public-Private Partnerships (PPPs) refer to cooperative efforts between the public and private sectors to improve infrastructure services. In my opinion, the correct PPP match occurs when the local community and the entities involved reach an equilibrium that meets their needs where both parties "own" the project. It is in this latter part that distress develops.

Globally, organizations such as the United Nations Development Programme’s (UNDP) Public-Private Partnerships for the Urban Environment (PPPUE), acknowledge that "one size does not fit all" for a partnership model. The PPPUE demonstrates the various relationships feasible as the following graph:



Source: www.undp.org/pppue/about/what.htm, accessed June 30, 2008

Nationally, the U.S. Department of Transportation’s Federal Highway Administration also delineates alternatives available for PPPs.

As the PPPUE states, "For governments, the challenge is to find ways to fulfill their responsibility for ensuring that all citizens have access to basic services, while meeting the needs of private investors. This implies a … transition for many governments, from provider and manager of basic services, to enabler and regulator. For private firms, the challenge is to be convinced that investing in any particular project offers more attractive returns than other available investment opportunities. Drawing that conclusion depends on the firm’s comparison of the potential returns against the potential risks, including both country risk … and project risk (reflecting the specific characteristics of the investment opportunity offered by governments)."

My interest lies on how these challenges are resolved and therefore, as a community member interested in solutions that work, I propose the following for effective PPP relationships:

Issue: Understanding the project and the partnership.
Solution: Effective research and relevant background data. This is akin to conducting research on the expected audience before a presentation or performing a subsurface exploration for anticipated construction. Each party (government, community, private entities) should be clearly aware of the situation to be addressed and the top three special considerations or issues for that particular project (community sensitivity to private investment, special topographic features, alternative investment options, etc.) Do all the parties understand and agree on their definition of sustainable partnership?

Issue: Trust and maintenance of trust.
Solution: Timely effective communication at all stages. From the beginning, the leaders of the interested parties involved should be versed on the legal, institution, socio-economic, and political issues facing the project. This information needs to reach their respective constituents (community, investors, regulators, etc) soonest. The process should be as transparent as possible among the interested parties; other people should be notified of progress as the interested parties deem appropriate.

Issue: Addressing roadblocks.
Solution: Use lessons learned. The PPPUE, FHWA, and various publications address issues ranging from policy development, sustainable models, and behavioral dynamics to renegotiations, and project procurement and management. Using their framework and adjusting the parameters/lessons as needed for a specific project should aid in preventing and/or addressing project challenges.

A few weeks ago, a group of international engineers visited Pittsburgh and was very interested in potential PPPs in our area. I think that this is a sign that a new frontier in resolving infrastructure needs is in the horizon. Hopefully this future does not involve rush-hour construction.

What is your opinion on PPPs? E-mail comments in care of bdrake@zweigwhite.com.


Cathy Bazán-Arias, Ph.D., P.E., is senior staff engineer for DiGioia, Gray & Associates, LLC, Monroeville, Pa.


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