Public-Private Partnership Q&As
Why should governments turn to the private-sector to help perform services they have traditionally handled themselves?
Actually, public-private partnerships have been in existence since long before the Revolutionary War. In 1652, the Water Works Company of Boston was the first private firm in America to provide drinking water to citizens. Today, creative government leaders develop partnerships with private contractors to provide essential services to meet environmental compliance requirements and improve operations, without having to increase taxes upon their constituencies. Also, governments realize that the combined capital and intellectual resources of the public- and private-sectors can result in better, more efficient services.
Aren’t private companies less accountable than governments to the public?
Actually, private companies involved in public-private partnerships have a very high level of public accountability. They must answer to the government agencies that hire them, to various regulators, to the Securities and Exchange Commission, to congressional oversight committees and, in very visible partnerships, to the media. A private contractor that hopes to succeed and establish a reputation for quality service must be accountable to its government partners and to the public at large.
When services are contracted out to private companies, doesn’t that mean that public employees lose jobs?
The Department of Labor examined that very question and, in a 2001 report, found that public workers don’t lose jobs because of public-private partnerships. Examining partnerships in 34 cities and counties, the Labor Department found that virtually all affected public employees were either hired by private contractors or transferred to other government positions. In fact, the most productive partnerships have been those in which government employees (and sometimes their unions) are actively involved in the partnership planning process.
Isn’t there a danger of corruption when private companies are involved in providing public services?
The only way private contractors can achieve long-term success in partnering with governments is to provide quality, value and dependability. As mentioned earlier, private companies have high levels of accountability with the public, media and regulators at various levels. In fact, regulatory bodies tend to enforce regulations more tightly with private contractors than they do with government agencies, realizing that ordering government entities to comply with regulatory requirements can mean increased budget challenges and higher taxes. As a result, both private companies and government officials are under full scrutiny, which minimizes the opportunities for corruption.
Don’t private companies take short cuts in providing services in order to increase profits?
The reason governments are increasing their participation in partnerships with private contractors is because their constituencies approve of the high quality of services being provided without a commensurate increase in taxes. By reducing the quality of service, a company can reduce the possibility of repeat and/or new business. The profits made by the private-sector in these partnerships come from increased efficiencies, economies of scale and long-term financing that may not be available to the pubic-sector, and not from cuts in the quality of service.
When the private sector is involved, doesn’t that mean that citizens will eventually have to pay more for services?
There is more than ample evidence to show that public-private partnerships result in a higher quality of services while holding the line on costs. Private-sector partners are able to practice cost efficiencies to hold down expenditures, while also taking advantage of additional revenue streams. In cases where there have been rate or tax increases, it came as a result of upgrading or expanding systems — and under the terms of the contract signed between the public and private partners. Often, major projects can be undertaken at little or no cost to the public. For example, in the public-private partnership that rebuilt Washington, D.C.’s landmark Union Station, the multi-million dollar improvements were completed without using a dime of taxpayer money. In part, the private contractor is recouping costs from rents paid by retail shops in the facility.
Will the need for public-private partnerships increase, or will we see fewer of them as the economy improves and governments become less revenue-strapped?
First, public infrastructure and service needs far exceed the capability of government budgets to meet them. In education, for example, the American Society of Civil Engineers has said that 75 percent of America’s school buildings are inadequate to meet student needs. To close this schoolhouse gap would require a capital investment of $3,800 for every student in the United States. Even in better times, school districts won’t have the funding to meet this need. This is true in virtually every area of public life, from highways to waterworks. Public-private partnerships enhance the resources and the capability to address pressing public needs.
Second, public-private partnerships aren’t just about budgetary issues. Governments are turning to partnerships because they see that merging the resources of the public- and private-sectors makes it possible to improve the quality of services provided to citizenries. The U.S. military, for example, has developed partnerships to build housing for enlisted personnel, resulting in higher-quality living quarters without a large impact on the defense budget.