Making market forecasts is a tentative business at best, as fully illustrated by 2001 -- what seems to be the situation can rapidly and dramatically change in only a few months or even days. At the beginning of last year, government budgets showed hefty surpluses, along with predictions of excellent long-term balances and declining debts. This was matched with a lack of extraordinary demands for public services or facilities. In this environment, the "demand" for public-private partnerships was accordingly soft. Without a strong "push" from government budgetary shortfalls, a significant driving force was that the private-sector efficiencies led to improved delivery of services and environmental compliance.
At the same time, there were rising levels of resistance to PPPs. Many in the public sector saw little need to changing their traditional way of operating. Institutional inertia and misunderstanding of the private-sector's methods of operation created fears of poor performance quality, job loses and a host of other supposed ills. This tendency was reinforced by a growing campaign by a more vocal opposition. 2001 saw a quantum jump in opposition to the private-sector being part of the answer to meeting public needs. Many interest groups, among them some labor unions, mounted major public relations and lobbying efforts, branding partnerships as a version of "corporate welfare" that wasted public funds, cost employees their jobs and delivered poor service. With a rising number of corporate layoffs and the financial collapse of Enron, credibility of the private sector was further questioned. The end result is that the debate over public-private partnerships is increasingly an emotional one, with plenty of confusion about the facts. The resistance to public-private partnerships is unmistakable.
By the fourth quarter of 2001, some of these factors were turned on their heads. A softening economy weakened government incomes, while demands for services and facilities escalated dramatically. Deteriorating infrastructures for water/wastewater and transportation led to rising demands for government action (largely in the form of funding projects), while social services were being stressed by rising unemployment. The terrorist attacks of September 11th only added to the shifting balance. New demands for a war effort, improved security measures and relief for victims (both individual and corporate) further diminished the fiscal resources of government and only increased the demands on government. This also caused a shifting in priorities, forcing many traditional sectors of interest to public-private partnerships to be given a lower priority.
Another significant shift occurred by the end of 2001 -- confidence in both elected officials and civil servants rose significantly. Firemen and rescue personnel at "Ground Zero" and the Pentagon, and a dynamic President and mayor taking forceful leadership roles all created powerful public images. This carried over into almost all branches of government, leading the general public to view government in a more positive light. This included seeing government as a more credible source of services to address a whole host of public needs and concerns.
This sets in place an interest but unique matrix of factors influencing the market for 2002. Rising demand and declining budgets are classic drivers for the development of public-private
partnerships. The post 9/11 environment has led to a shuffling of government priorities, placing some traditional partnership areas in lower status than before. Simultaneously, it is uncertain how the added dynamics of increased confidence in the public sector as a delivery vehicle, and rising vocal opposition to private-sector involvement in the delivery of public services will effect this underlying pressure. Against this backdrop of cross currents and reversing trends, a look at individual sectors will provide a clearer picture.