For these reasons, it might be advisable to also develop public sector 'special units' that advice local administrations on the drafting of contracts (this entity could also advice local administrations in their evaluation of PPP projects, tender documents and bids, and in negotiations with private partners). The PPP Unit Partnerships UK in the UK and the Unità Tecnica della Finanza di Progetto in Italy serve these functions. These entities could lead the 'learning and standardizing' process by helping to internalize the informational externalities that exist across the different contracts, and could be made accountable for their actions.
As long as the entities are independent (e.g. the UK PPP unit is not), they could also be in charge of accepting or rejecting proposals for modifications to the standardized contracts made by local authorities, which would allow the use of flexible standardized contracts whilst maintaining control on possible abuses or mistakes. Advice, oversight and approval of modifications of the contracts during renegotiation could also be delegated to these special entities. Compared to a local public-sector party, the reputational concerns of the entity should be stronger, thus possibly limiting its incentives to renegotiate contract terms with the private-sector party. 38
As suggested by Monteiro (2005), these units specialized in PPP contract design and management should be separated from industry regulators (if any) in order to avoid a conflict of interest. A yet separate unit would then have to monitor the activity of the PPP unit, by surveying public-private relationships, collecting, analyzing, and then disseminating information on PPPs.
In fact, the very development of PPPs enticed many competent public sector employees to join the private sector. While this has probably raised overall productivity, it made the objective of creating value for money for the public sector through PPPs even more challenging. A skill retention policy, e.g. increase remuneration of project manager or module training qualification linked to an existing training qualification, may help reducing this problem.
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38 See Bennett and Iossa (2006) for a study on how delegation of contract management and renegotiation to a PPP unit affects the investment incentives of the private-sector party.