The motivations and incentives that guide governments are vastly different from those that guide private corporations. With no profit motive guiding their decision-making, governments are mostly motivated by a desire to work in the public interest. (Of course, this excludes corrupt governments, as we have discussed before.) This is not to say that governments are purely altruistic, but that by and large, they are usually motivated by the political consequences of their actions-whether an action undertaken by a government will increase or decrease popular support. Of course, a public-private partnership's impact on popular support is entirely conditional on the project's success. A successful PPP could result in increased popular support, a failure could deliver the opposite. These political calculations can even vary based on the timing of a project. For example, fearing political repercussions, a government's willingness and capacity to participate in a PPP may be drastically different during an election year-for better or for worse.
Democracies are particularly vulnerable to shifting political winds, and given the relatively rapid political cycles that govern the public sector, it is crucial to determine the degree to which a government's capacity to deliver on the PPP is contingent on preserving a certain political dynamic. Imagine a country where one dominant political party is open to private-sector collaboration, but another party is staunchly opposed. Such an unstable political dynamic is inherently less predictable, and thus riskier for private-sector partners looking to enter into long-term contracts. PPPs are long-term assets. As such, short-term political cycles introduce risk. If the PPP-opposed government assumes power, what becomes of, say, a ten-year PPP contract? Thus, it is highly important to build partnerships with as broad a political consensus as possible, so as to insulate partnerships from political change or factionalism.
Government aversion to private-sector collaboration usually stems from one of three key objections. First, governments may be concerned about impropriety in partnerships, or the appearance of impropriety. Even in situations where no literal conflict of interest exists, public-sector partners can open themselves up to criticism for appearing insufficiently divested from conflicts. Moreover, government participation in a PPP can often create confusion among the general public. Because governments frequently act as regulators of the private sector, their participation in a PPP-particularly one without adequate "guardrails"-can appear to introduce a conflict of interest, even when this is not necessarily the case. Transparency is essential to diminish misunderstandings of this nature.
Governments may also be concerned that they will be out-negotiated by skilled private-sector partners. With significant experience in the kinds of contracts pursued by multinational corporations, the private-sector is generally better prepared to model outcomes and negotiate a contract successfully.
And third, governments may also face political blowback for a PPP, particularly if a large public-sector workforce fears that their jobs are at risk of being privatized. This is certainly the case in healthcare. For perspective, there are over 59 million healthcare workers worldwide.34 In the United Kingdom, the National Health Service employs 1.5 million people; it is the country's largest employer.35 According to the CDC, in the United States, healthcare employs 18 million individuals, many of whom are employed in the private sector; healthcare is the fastest-growing sector of the US economy.36 Fears of privatization and job loss-however misguided-represent a serious hazard to governments looking to engage in a healthcare PPP.
For governments, these risks are certainly real, and must be considered. However, all three (and numerous other types of risks) can be managed through effective communication, incentive design, and careful monitoring.
Another unique characteristic of the public sector is the siloing of different government functions by ministry. Most healthcare PPPs will involve some kind of coordination with representatives from a ministry of health or equivalent institution. However, there are numerous other ministries and organizations within the public sector that might also come into play, including additional ministries-Finance, Transportation, Agriculture-and even PPP-specific institutions established at the country level. Aging populations, for example, present challenges that cut across a number of ministries. A ministry of health might be engaged to provide medical care to seniors, but the ministry of transportation may need to provide wheelchair-accessible transit to and from the hospital in order to enable mobility-limited seniors to seek this care. The ministry of finance might be involved to administer social security (or a similar program). As we can see, the "ripple effects" that emerge even from a single issue can extend across an entire government. This is why-as we will discuss in a few pages-it is essential to carefully consider a project's scope.
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34 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5299814/
35 https://www.nuffieldtrust.org.uk/resource/the-nhs-workforce-in-numbers