The way in which the tasks discussed in the previous section are performed can be organized under different institutional arrangements. One important factor here is the double role which has to be played by the government: as part of the contract and as responsible for the public good. And in this context, the government has to include other stakeholders in the management of the PPP contract.
As "partner" of the PPP the government is required to be part of a "sustained collaborative effort"130 with the private partner. At the same time as representative of the public interest the government has to ensure that the contract is fulfilled by the private party and that the interest of consumers and all other stakeholders are protected.
Usually, PPP projects in infrastructure sectors involve a large number of stakeholders (see Table 15). Different groups of stakeholders may have fundamentally different views on PPPs, and different priorities and expectation. In this regard the public sector has a key role in ensuring an adequate balance of interests among all the stakeholders.
Table 15 : Stakeholders Groups
|
| Actors | Groups |
|
| Political | Incumbents vs. Opposition Internationalists vs. Nationalists / Isolationists Global vs. central vs. regional vs. local |
|
| Economic | Investor vs. unions / worker vs. community rights Partners vs. competitors (particularly local) Potential vs. current winners in in value chain |
|
| Social | Consumer advocacy including health/safety issues Environmental groups Traditionalists (including some ethnic & religious groups) |
Source: Witold J. Henisz - Dynamic Influence Mapping of PPP Stakeholders
An important step in an effective contract management process is clear identification of the key stakeholders to the Project Contract, their respective roles and the relationship between them. In a monopolistic context, as is the case in most infrastructure sectors, the relationship between the service provider and the final user is a central problem for the government. Protecting users from abuse by the monopolists becomes a central task which can collide with the functions of the government as "partner" in the PPP.
An attempt to solve this dichotomy was entrusting the regulatory functions of protecting users from monopoly abuse to an independent agency. The creation of an independent regulator was the most common choice during the 90s.
In effect, one of the key issues of the reform of infrastructure sectors in Latin America, which took place in the 90's and stemmed from the experience in the United Kingdom, was to unbundle the functions of tariff setting, regulation and service provision -all of them previously concentrated in the public sector-, and entrust the regulation to an independent organization with a clear mandate so as to try to protect long term objectives (greater coverage, better services, higher efficiency) from short term pressures faced by the government (lower tariffs to avoid inflation, overstaffed in state-owned companies). Since then, it is usually the regulator's job to preserve the interests of the parties involved and to supervise the compliance with the obligations under the PPP contract.
In practice there is a continuum of institutional arrangements ranging from supervision by the sectoral ministry to the creation of an independent autonomous regulator. Intermediate alternatives such as contract specific institutions, competition authorities, etc are also possible.
However, the specific institutional setting will depend on many factors that need to be taken into account when deciding on the most efficient way to supervise a PPP contract. The magnitude of the project, the size of the respective country or jurisdiction, the technical characteristics of the sector, the expertise on previous agreements, the technical and institutional skills, the country's legal tradition131, etc. are all factors that must be carefully reviewed.
In spite of the existence of different institutional possibilities available for the oversight of PPP contracts during their operational stage, in general terms, it can be said that the creation of a regulatory agency has been, during the 90s, the most usual practice in most of the countries and sectors.
However, this 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.
As partner to the project the government has also a function in ensuring that the legitimate interest of all stakeholders are taken into account while at the same time ensuring that efficient solutions are implement. This involves making sure that the individual interests of the stakeholders do not block solutions which are in the public interest.
According to Schwartz, and others, "This comes from the hard-learned fact that governments cannot simply abandon public services to private operators, leaving 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".
____________________________________________________________________________________
130 See PPP definition in section II.a
131 Many of these elements represent what Levy & Spiller denominate the "institutional endowment", which from these authors' point of view, plays a key role in the performance of the agencies responsible for the regulation of infrastructure sectors.