Recall that when a large corporation has elements of their business model that conflict with public sector health goals, a conflict of interest is created. It can be difficult for governments to know whether to engage the private sector, or whether such engagement will benefit them in the long run. Recall also that conflicts of interest can be managed through effective incentive design.
While it can be challenging to effectively map the incentives of a large multinational corporation, it is a task that can prove highly valuable to a public-sector partner looking to maximize value within a PPP. There are relative risks in engaging a private-sector partner where conflicts of interest are present, as we have explored. However, it is also clear that, if governments are willing and able to manage these conflicts, they can find new areas of value that, left untapped and unexplored, could otherwise be squandered. Therefore, governments must ensure they have the necessary capacity to actually plan, execute, and manage PPP arrangements.
Let's now return to our hypothetical example about the theoretical BigSodaCo water project. Recall that the government faced a series of trade-offs-would the increased availability of fresh water increase or decrease public health? Would the cost savings of partnering with BigSodaCo offset the cost of higher rates of diabetes and other NCDs?
While the answers to these specific questions will vary from project to project, it is clear that governments who are unwilling to explore the possibilities for value creation within these trade-offs could be leaving value on the table. Measured against the opportunity cost of abandoning an entire project, the management of conflicts of interest could also be considered a form of value creation.