Graeme Hodge Centre for Regulatory Studies, Faculty of Law, Monash University

1. Delivering Performance Improvements through Public-Private Partnership:Defining and Evaluating a Phenomenon Graeme Hodge Centre for Regulatory Studies, Faculty of Law, Monash University

2. Introduction • The PPP Phenomenon • Our history of co-operation & families of PPP • Values, Beliefs, Ideologies & Language • Different values and expectations & our language games • Improving Performance through PPP • PPP Promises • Six Evaluation Challenges • An International Review of LTIC type PPP • Lessons and Conclusions

3. Introduction • Global resurgence in PPP phenomena • PPPs hailed as new collaborative way to get the best of both sectors… • So, • How do we define PPP? • What are their aims? • How well do they perform given experience to date?

4. 2. The PPP Phenomenon • History is replete with ‘partnerships’: • Contracting-out in the Persian Achaemenid empire! • 82% of Drake’s fleet conquering the Spanish Armada in 1588 were private contractors to the Admiralty • Falck Ltd has been a Danish govt partner for 100 yrs • 2000 Sydney Olympic Games… • Channel Tunnel • This public-private ‘mix’ is good news and bad news! • Scholars now see PPP in terms of both ‘governance’ and ‘language’.

5. Urban Renewal/Downtown Eco Development (United States) Institutional co-operation (Netherlands Port Authority) Long Term Infrastructure Contracts Long Term I-f Contracts (UK PFIs, CityLink) Civil Society/Community Development (Europe) Public Policy Networks (all policy areas) 2.The PPP Phenomenon • PPP as Governance: organisational/financial arrangts • eg: PPP = ‘co-operation of some sort of durability between public and private actors in which they jointly develop products and services and share risks, costs and resources which are connected with these products’;Van Ham and Koppenjan (2001, 598) PPPs exist across 5 families • LTIC type PPPs • €200billion in Europe over past 15 years • At April ‘09, UK had signed up 641 contracts (£274 b nominal value … & £64b capital value)

6. 3. Values, Beliefs, Ideologies & Language • PPP as a Language Game • ‘Multiple grammars’ exist for PPP (Linder 1999) • Preferential label to privatisation or contracting-out • Framed as ‘historically, nothing new’ … So: Is PPP = Privatsn? UK Govt YES Vic Govt No! Are PPPs new? Critics Yes Advocates No! (& goalposts change over time as we debate… ) • Language games are the lifeblood of politics and public policy - there are always many agendas at play!

7. 3. Values, Belief, Ideologies & Language • We have very different expectations of the public and private sectors • Fundamentally different values underpin each ideal • We often believe strongly that specific services belong in specific sectors (Ideology always plays a role!) Value differences between the pure public service private sector models. (Source: Pollitt ‘93).

8. Traditional Service Management Contract Contract Lease Working with the private sector BOOT BOO Concession Outsource 1 2 5 15 25 - 30 N yrs 4. Improving Partnership Performance • The LTIC PPP family alone is huge(with at least 128 (27) pure combinations existing… • Notice the language games here… where PPPs are many things to many people (whilst being specific things in some jurisdictions) • What is the performance evidence here? • What are our PPP objectives? • Initially to get around the PSBR (X) • Reduce pressure on govt budgets (X) • Provide better VfM () • better accountability • Better on-time & on-budget delivery & project innovation? • Stronger market confidence, improved public sector innovation, & increased international ‘sales’ of professional services • Business assistance in difficult global times, and economic development

9. Symbolic political movement Governance mechanism Policy Works program Specific financial arrangements A specific project Accountants Eng/Bureaucrats Economists Political Sci Public policy Regulatory 5. Evaluation Challenges • There are a multitude of evaluation challenges. Six include; • Defining the ‘evaluand’; • Multiple PPP objectives; • Multiple discourses and disciplines; • The evaluator’s role (scientist / enlightened citizen / facilitator)

10. Political Scientific Implementation 5. The Evaluation Challenges • Evaluation rigor for individual studies; • ‘Evidence’ based – but which? and whose? • Scientific experiment - with control groups? • Accurately reviewing multiple individual studies of PPPs • Traditional literature reviews are notoriously unreliable • Meta analysis aims to discipline data collection, synthesis and reporting (with clarity, explicitness and open-ness) • Data accessible to peer review

11. Governance VfM 6. An International Performance Review • For LTIC type PPP, what does the performance evidence say? • Rhetorical evidence is colourful!'yet again screwing the taxpayer' … 'evil bandits running away with all the loot' … 'Son of Fat Cat' … ‘Pretty Pleased Politicians’ … ‘public fraud and false accounting … commissioned and directed by the Treasury' … 'Problem, Problem, Problem' …amidst 'a marriage made in heaven' and lots of advocacy … • Do we look to literature in ‘political science/policy/public admin’,or ‘economics/engineering’?

12. 6. Int Performance Review: VfM Evidence • UK: AA & LSE Eco’s (2000)analysed 29 business cases • 17% lower cost est • Pollitt (2003)argues that NAO suggest… best deal in 10/10 cases, & good VfM in 8/10 cases • US: Bloomfield et al (‘98)saw corrections PPP as 'wasteful & risky' • Australia:Walker & Walker (2000)saw ‘accounting trickery’, eroded A/Cy, & M2 24%roi • Denmark:Greve ‘03 Farum failure was ‘the most spectacular scandal in the history of Danish Public Admin’ The International Performance Findings on LTIC PPPs are Mixed! • Shaoul (2005) saw manipulated PSC & VfM estimates, the PFI tail wagging the planning dog, and shareholder returns of up to 86%post-tax …‘policies that enrich the few at the expense of the majority…’ • Leviakangas (2007) private finance not cheaper • Reeves & Ryan (2007) PPPs 8% - 13% more expensive • Pollitt (2005)despite high profile problems and the govt’s advocacy, ‘it seems difficult to avoid a positive overall assessment’ • Allen Consulting Gp ‘07 PPPs 11% cheaper • Auditor General NSW ‘07 PPPs were 7% - 23% cheaper • Boardman et al (05) 76 US projects • Hodge(05) 48 Aust Projects • Peter Fitzgerald’s analysis of 8 Victorian cases in 2004 found innovation, but at 9% savings to 6% cost increase cf PSC (for 8.6% or 5.6% disc rates) • Blanc-Brudeet al (2006) PPPs were 24% more expensive than traditional contracts ~ same as cost over-runs…

13. Importantly: Few statistical studies with control groups The counterfactual is vague… Nearly all studies are business case estimates (though a few are numbers early in contract…) Empirical historical experience for ‘public works’ has been mixed …eg. London Underground ‘has had a history of completing investment projects over budget and late’, with, for instance, line upgrades for the Jubilee Line being six years late and 30% over budget, and an analysis of some 250 projects by LU between 1997 to 2000 revealing cost over-runs averaging 20%’. NAO surveyssay 81% of org’s saw PFI as OK; 6%/46%/29% for exc / good / OK 6. Int Performance Review: VfM Evidence • Mott Macdonald (’02) survey reports better on-time & on-budget delivery than traditional projects(76% vs 30% & 78% vs 27%) • Recent peer review has questioned these measurements …‘there is no evidence to support the Treasury cost and time overrun claims of improved efficiency in PFI’ ... [estimates being quoted are] ‘not evidence based but biased to favor PFI’… ‘only one study compares PFI procurement performance, and all claims based on [this] are misleading’Pollock et al (2007)

14. 6. Int Performance Review: Governance • What’s really new with today’s LTIC PPPs? • the preferential use of private finance • the highly complex contractualisation of ‘bundled’ infrastructure delivery arrangements, and • altered governance and accountability assumptions. • Gov’ts now have a mega-credit card • PPPs can be effective for quick project delivery • Interestingly, governance issues have been as controversial as VfM matters The International Findings on LTIC Governance are also mixed!

15. 7.Lessons and Conclusions • Economic • An economic development tool • Sale/export of professional services • ‘Whole of life’ cost provision • Financial • Improve VfM • Reduce budget pressure • Project Delivery • On-time • On-budget • Governance • Be a symbol of 3rd way government • Put infrastructure onto public agenda • Increase business confidence • Better on-budget delivery • Improve accountability • Cultural Change • More innovative projects • More innovative public sector • Policy • Take infrastructure funding off-budget • Support business in difficult times • Increase feasibility to charge users • Include all govt-business interactions

16. 7.Lessons and Conclusions • Perhaps PPP is a BRAND for governments? • Brands identify and differentiate offers in consumer markets • For government, PPP identifies and differentiates its policies from opposition paralysis • PPP symbolizes positive business relationships, a new way of governing, sophistication, innovation, exports and performance… It is deliciously ambiguous • Just as ‘Coke is life’, and ‘HP is quality’, perhaps PPP is ‘third way high performance government’ in action? • The Future of PPP could be bright because; • PPP is ambiguous • They are policy (& …government policies do not fail!) • Local PPP definitions may change (eg using public funding) • Goals will remain slippery…

17. 7. Lessons and Conclusions • PPP has a long historical pedigree & rhetorical power of ‘partnership’ label is undisputed • Today’s LTIC PPP has new features: • the preferential use of private finance • high deal complexity & • altered governance and accountability assumptions • We face many challenges in evaluating LTIC PPP • This mega-credit card requires governments to adopt a ‘caveat emptor’ ethos, amidst uncertainties for citizens • We need to rethink PPP claims and their governance • Nothwithstanding, reframing PPP as a BRAND for government may enable a more legitimate future for PPP given their potential collaborative advantages