The regulatory institutional solution, in many cases, has not been sufficient to fulfill the goals of sector reforms and the introduction of PPPs in infrastructure sectors. For that reason, the new trends in PPPs design, particularly in developed countries, have focused mainly in the parties' cooperation as a key factor for a successful private participation.
In this regard, Schwartz and others claim that: "The term "Public-Private Partnership" captures the history of these relations while suggesting a new recognition that the relationship between the two main parties has to be more than just contractual and that all primary risks--investment, commercial operations, social and environmental impacts, currency mismatches, force majeure, consumer and public relations--cannot be placed solely on the shoulders of one party or another when the provision of sensitive and naturally monopolistic basic services is in question. Public-Private Partnerships (PPPs) can thus be seen as an evolution of the existing models that leverage the private sector in the delivery of public services."
This new approach focuses more on the "partnership" between the private and public sectors, thus highlighting the need to develop joint decision making mechanisms in contracts to ensure that the proposed objectives are accomplished (see BOX 11).
BOX 11 : Partnership aspect of Partnerships Victoria Projects
The intention of the parties to a Partnerships Victoria contract should be to enter into a contract that creates a long-term relationship, recognizing that each party starts the project expecting that it will receive certain benefits from the project. This is not a 'partnership' in the strict legal sense, but rather is a relationship in which the parties understand the importance to one another of project performance, but do not compromise their respective contractual rights and obligations. |
Source: Partnerships Victoria Contract Management Guide 2003
According to Schwartz, and others, "This comes from the hard-learned fact that governments cannot simply abandon public services to private operators, leave them to deal with anxious consumers, and to implement overly ambitious investment plans based upon the original expectations of bidding documents and static contracts, or the review capacity of unpredictable regulatory institutions. All too often, these arrangements led to renegotiation and unplanned public transfers to maintain service continuity. And at their worst, these unrealistic expectations resulted in cynical gaming by opportunistic bidders; additions of non-economic investment burdens by recalcitrant governments; canceled or nationalized projects; and a public wariness toward any private involvement in the provision of public services".
Several mechanisms and processes for contract supervision and monitoring result from this new approach. Said mechanisms and processes are aimed at creating an opportunity for joint decision making within the contractual relationship, thus sharing responsibility for the key aspects regarding service provision.
A PPP may attempt to internalize the process of relating quality to cost of service. This is particularly true in those projects and sub-sectors--such as roads, power generation, water and wastewater treatment, and public edifices (e.g., jails, hospitals and schools)-that are far enough "upstream" from service delivery so as to be isolated from the frequent and intense pressures of the political economy.
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Mixed-capital company | The board of the operating firm includes both government shareholders and private shareholders. |
Contract Director | Person in charge of coordinating the government roles in regards to the contract. Main channel between the parties. |
Co-location |
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Joint Management Forums | Provides a mechanism to manage the relationship between the private and public arties to the contract |
Contract Administration Manual | Identifies what needs to be done, by whom and when. Also defines how the government's role will be performed. |
These institutional types, which originate mainly in PPPs outside the infrastructure sectors, cannot completely replace the regulatory functions inherent to a natural monopoly. However, they may be useful supplementary elements in the design of an institutional framework for the construction, operation and maintenance stages.