The purpose of this paper is to examine an aspect of public private partnerships (PPPs) that seldom features in the contemporary literature in this area. Whilst much has been written and said of the varied nature PPPs, their utility in creating public infrastructure (whilst limiting a governments debt financing liabilities) as well as operational aspects of PPPs, little attention has been paid to the less savoury aspects of PPPs. What happens when PPPs fail? What type of costs can one expect to face? And who is to bear the brunt of these costs? Given the vastly different types of PPPs around the world, there is no one size fits all approach to dealing with these problems. Some general considerations, however, can still be distilled and serve as guide posts to interested parties engaged in PPP projects in most if not all OECD jurisdictions.
Public funded initiatives (PFIs) in the United Kingdom (UK) paved the way for similar collaborations between the public and private sectors around the world. In Australia PPPs are relatively new forms of business models with a much narrower scope of operation than the UK. In the UK PFIs have been used to build schools, hospitals as well as larger scale transport infrastructure projects. In Australia, by contrast, PPPs have been predominately used only in relation to public transport infrastructure. In the Australian state of New South Wales (NSW) two high profile PPPs have recently failed exposing the government to significant political costs. This paper examines the experience of the NSW government and focuses on the nature and consequences of the political costs that may be encountered upon the unsuccessful ending of a PPP venture. Economic losses, to a large extent, depend on the individual circumstances of individual PPPs and as such this category does not lend itself to general principles. The focus this paper draws upon the political category of non-economic loss is perhaps more generic and open to a broader approach from which generally applicable principles and lessons can be extracted.
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Andrew Dahdal, Associate Lecturer, Faculty of Business and Economics, Macquarie University email: andrew.dahdal@mq.edu.au