Given the numerous forms of public private partnership potentially available to local government, there is some confusion as to what constitutes a public private partnership. Public private partnerships are often not considered due to erroneous information based on misconceptions. The most common of these misconceptions are:
• Public private partnerships are the same as privatization
Only one form of public private partnership, known as Build-Own-Operate (BOO) can be described as coming close to privatization. All other forms require an ongoing partnership between the private and public sectors. Even Build-Own-Operate involves a form of partnership in that the public sector can place conditions and regulations on the private partner. One of the key reasons for considering public private partnership is the ability to introduce competition in the provision of local government services, either between private firms or between the private and public sectors. Full privatization merely transforms a public monopoly to a private monopoly such that the benefits of public private partnership are not realized.
• By entering into a public private partnership, local government loses control over the provision of services
By entering into a public private partnership, local government does not give up its ability to implement its policies or regulate the provision of services. The local government establishes the ground rules and has the ability to shape the public private partnership to reflect its own objectives, policies and regulations. It can be argued that the local government actually has more control, in that it has well-defined contractual remedies in a public private partnership arrangement that it may not have with its own management and staff.
• Public private partnerships apply only to infrastructure projects
Public private partnerships can be an effective and innovative way of delivering a range of local government services and facilities. While large infrastructure projects tend to capture the most public attention, public private partnerships can also be used to deliver services that do not involve capital projects. Examples include provision of data services, refuse collection and road maintenance.
• The principal reason for local governments entering into public private partnerships is to avoid debt
The principal reasons for local government becoming involved in public private partnerships are to benefit from increased efficiency, shorter implementation time, greater innovation and ultimately better value in the delivery of services brought about by increased competition. The ability to finance a project so that the debt is "off book" should not be the prime motivation for entering into a public private partnership in that the local government and the ultimate users of the service are still responsible for servicing the debt in one way or another. The emphasis should be on structuring creative and cost-effective ways of delivering services, not on creative accounting.
• The quality of service will decline under public private partnerships
Quality of service does not depend on whether the service is delivered in a traditional manner or through public private partnerships. The local government has the ability to stipulate the quality of service to be provided and ensure it can enforce provisions of the contract dealing with quality control. The nature of public private partnerships suggests that the quality of service would not only be maintained, but enhanced. It is in the private partner's interest to invest in the service, become more efficient, enhance the quality of service to attract more customers or provide additional services to customers.
• Local government staff will lose under public private partnerships
Both union and non-union staff sometimes fear public private partnerships because of potential job loss or reduced wages and salaries. In British Columbia, labour laws provide for the succession of labour contracts. Any public private partnership agreement will need to reflect the labour laws of the province and existing collective agreements. Often, the labour representatives are invited at an early stage of the process to discuss options for service delivery.
Most partnership agreements that have been negotiated in Canada require the private partner to take on public staff and guarantee job security and salary levels. Any changes in staffing levels are generally consistent with labour contracts and occur through attrition rather than layoffs. Many of the benefits of public private partnerships, such as increased efficiency and higher quality of service, have been accomplished through former employees of government. Reasons for increased productivity include increased investment in employees through training, technology transfer and skill diversification.
• The cost of service will increase to pay for the private partner's profit
Governments sometimes resist public private partnerships because they believe that the cost of providing the service will increase to reflect the profits the private partner must realize to stay in business. While the private partner will need to make a profit, the profit must be earned within the existing or a lower price for the service. Presumably, the local government would only enter into a public private partnership if the price of providing a given service was lower than if provided by the local government, or if a higher level of service could be provided for the same price by the private partner. (This assumes that the local government is not subsidizing the cost of providing the service.) The private partner's profit can only be realized through increased productivity or expansion of service, not through higher prices
• Local government can finance the cost of services at a lower cost than the private sector
By borrowing through the Municipal Finance Authority, local government can often finance projects at a lower cost than the private sector can. However, this may not always be the case. The objective of local government should be to focus on the overall advantages of the public private partnership arrangement.
• There are only two partners in a public private partnership
From the narrow perspective of the public private partnership contract, there are only two partners. In reality, there are additional parties and interests that need to be on board as "partners" for the public private partnership to succeed. These include the customers of the service and the employees who will operate or deliver the service. Public private partnerships cannot succeed without the support of the end user of the service or the agreement of those who will ultimately deliver the service. A four-way partnership is required to successfully move service provision from the public sector to a partnership arrangement.