Although there is no universally accepted definition, for the purposes of this paper, Public Private Partnership (PPP) is characterised as a collaborative endeavour (Smyth and Edkins 2006) involving public and private partners, developed through the expertise of each partner in order to meet identified public needs through appropriate resource, risk and reward allocation (Canadian Council for Public Private Partnerships 2009). The traditionally long-term nature of PPPs (often upwards of 20 years) means that management, beyond the development and delivery phases, of the partnership itself and of the performance of the private partner, is likely to be important to the success of a PPP project in terms of delivering Value-for-Money (VfM) to the public.
As with PPP, there is no single definition that fully encapsulates the concept of 'VfM'. For the private partner, it may simply represent the size of its profit margins, and hence return on investment, in delivering contracted services. For government, however, VfM is based on the delivery of planned social outcomes. It is a mantra of contemporary public government and public administration.
Within context of this paper, VfM denotes:
'A balanced benefit measure covering quality levels, performance standards, risk exposure, other policy or special interest measures, as well as price. Generally, VfM is assessed on a "whole of life" or "total cost of ownership" basis' (Victorian Department of Treasury and Finance 2011, p.19).
While many governments have substantial experience in the development and implementation of PPP projects, there is probably a corresponding lack of maturity in terms of effective approaches to achieving VfM outcomes during the operational phase of PPPs. This is because many projects are still only in the early years of their concession periods, and the metrics for, and assessment of, the longer-term success of PPP projects is not yet fully understood.
PPP concessions are generally formalised through complex contractual agreements between the public and private partners. Sub-contracts determine the roles, contributions and behaviours that are expected from the separate parties that consort to form the private partner. However, as no contract will cover every eventuality of something going wrong, effective ongoing partnership relations between the public and private partners are important for dealing with unforeseen issues as and when they arise.
Operational complexity occurs as the constituent parties of the private partner may change over time (e.g. if loan finance transfers to a new lender). The public partner may also introduce change to the PPP, e.g. by transferring contract administration and management to a different government agency. Re-negotiation of the concession agreement occurs if the partners contemplate changes in the scope of the PPP, such as the widening of, or extension to a toll road. These factors each affect relationships between the PPP partners and the public partner's capacity to manage the performance of its private partner.
Relationship and performance management issues, in the operational phase of PPP, were explored through interviews conducted with 34 representatives from the public and private sectors. The interview findings are reported here. First, a short contextualising literature review, covering partnership management and performance management, is presented. This is followed by an account of the interview administration and interviewee demographics. The findings are then presented, together with analysis and discussion. Recommendations for practice in public sector governance during the operating phase of PPP are made.