We have seen how successful PPPs create incentive structures that align the interests and motivations of public and private partners. But how do PPPs arrive at these structures? Incentive structures-and the allocation of risks and opportunities-are devised through an iterative process of negotiation. But far from the winner-take-all style of negotiation commonly associated with, say, settling on a sale price, PPPs require a far more nuanced approach.
Negotiation is the skill through which all the others are affected. Though negotiation is a common skillset, professionals in both the public and private sectors hold deeply ingrained misconceptions about how negotiation works. Many view it as a "soft skill," referring to the interpersonal qualities that characterize effective negotiators. However, far from the "firm handshake and eye contact" model, negotiating in PPPs involves hard analytical skills like stakeholder analysis and incentive mapping. Government partners may feel themselves highly skilled at negotiation in situations where they hold large amounts of power, but can also feel out-gunned in situations-like PPPs-where they have less leverage. Not surprisingly, in negotiating a PPP, government officials can feel outgunned, as executives in the private sector generally have far more experience with the kinds of negotiations involved in PPP design.
Effective PPP negotiation also requires an open mindset: openness to creating success for your own team and the other party, openness to new and innovative ways of protecting your own interests, and openness to revising and recalibrating deals as circumstances develop. While conventional negotiation tactics are all geared towards finding success at the table, three-dimensional negotiation begins even before that.