Engaging in public-private partnerships

June '99 News

As public and private organisations fight hard for responsive services and competitive advantage, by way of concentrating on their core activities, partnering has rightly become the trend: "If it is not what you do well," says the modern management jargon, "partner with those who do, and in the process gain access to better resources and expertise."

In comes that most confusing buzzword of the current business vocabulary: Public-Private Partnerships, or PPP's. PPP's explore new ways in which the private and public sectors can work together in providing public services and developing, financing and implementing facilities.

A new approach in Facilities Management

In general: "A facility is something that promotes the ease of an action, operation or course of conduct. It is something that is built, installed or established to serve a particular purpose".

The traditional concept of a "facility" has a spatial alliance and typically refers to fixed assets such as buildings, property or other specific things; but it can also be meant as an abstraction. This can be explained through the fact that a facility has a distinct functional meaning and purpose - to support the core processes, which in turn promotes the organisation's objectives. Following this line of thought, the natural environment in which the organisation's services and products are produced and delivered, should then also be classified as a facility in the abstract sense of the word.

When one looks at the typical life-cycle of a facility, it passes through a series of distinct phases. As one considers each of these phases, whether it is acquisition, utilisation planning, maintenance or disposal, it becomes clear that the delivery of practical solutions to difficult problems is present in each phase of the facility's life cycle. Government's business in the fields of justice, correctional services, transport, defence, public works are currently being boosted by private sector concerns that help to acquire, plan, maintain, dispose and manage their facilities.

Although still relatively new to traditional government functions, teaming with the private sector to provide new and better means of delivering output has been implemented successfully in the past few years in areas such as public utilities, airports and transport services. In cities around the world, private contractors collect garbage, deliver mail, build roads and bridges and manage civil services. Now, many governments are seeking to extend these arrangements and apply them in other areas such as facilities management. One example of creating partnerships on a regional scale is the South African government's drive towards creating SDI's or spatial development initiatives. The West Coast SDI is currently attracting various projects (of which some are PPP's) worth R20 billion altogether.

As governments explore different relationships with the private sector, coherent facilities management approaches will become more widely used. Over time, the public and private sectors will develop a greater understanding that each other has different and complementary skills, experience and resources to contribute. With this understanding, an environment of greater mutual interdependence and partnership in the facility management process will be created.

"A facility is something that promotes the ease of an action, operation or course of conduct. It is something that is built, installed or established to serve a particular purpose"

Mutually beneficial partnerships

The objective of any PPP is to negotiate an arrangement whereby the best of private sector knowledge, skills and resources are combined with government in its quest for seeking new approaches to an age-old facilities management problem - a lack of funds. Such an arrangement is usually made possible through the efforts of a private concern which is inspired to create a mutually beneficial partnership with government.

As a rule of thumb, it will be concluded after implementing a successful PPP, that one of the most important advantages gained was the fact that the move towards working with the private sector meant that the government could improve, maintain and/or extend facilities, without using new taxpayer money. Value-based arrangements will let the public and private sector share, to varying degrees, the risks and rewards of the proposed PPP.

Two key rules usually help to determine an appropriate value-based financial arrangement:

Firstly, the private sector concern should show that a suitable revenue stream would be generated due to the implementation of the PPP. This anticipated increase in the revenue stream should then be rewarded by the public sector by decreasing the cost base associated with implementing the PPP at the facility.

Secondly, an acceptable time frame for achieving results should be established. This will determine when each party can anticipate realising benefits, and thus, when the results from these benefits will actually be derived at the facility.

Applying the correct strategy

What is critical to understand about PPP's is that it leaves the door open as to the best business strategy to use on any potential challenge, issue, "deal." It is the incorporation of best government and business practices to offer best value and accountable government service. There is no predisposition for outsourcing or even privatisation, and when either of these options are pursued they must be assessed in light of larger government accountability issues.

The key elements of the strategy to be followed in implementing a PPP are:

A process should be established that is transparent to all its stakeholders.

A value-based arrangement should be designed that is mutually beneficial to the stakeholders.

A logical sequence of events with definite deliverables after each activity should be presented to the stakeholders beforehand.

The PPP should be driven on a project management approach. This implies that it is seen as a combination of limited human and other resources drawn together by a sequence of activities within a temporary organisation to achieve a uniquely specified goal.

There are two distinct phases in managing the PPP.

The first phase has to do with forming a concept of what is to be achieved with the PPP, as well as developing a plan to achieve this goal.

The second phase has to do with taking the necessary steps to achieve the PPP's objectives, as well as completing, or closing out, the project.

Flexibility - the key to success

Privatisation... Transformation... Joint-use... Competitive Government... Deregulation. These terms are heard in the news every day. The pendulum is swinging toward new, creative combinations of private and public capabilities. As the SA government recognises the need for revolutionary change in the management of its facilities (Public Work's White Paper, 1997), it may find budgetary constraints that inhibit it. To meet such needs, it should forge partnerships with private organisations and develop innovative financial and management arrangements with respect to the facilities under its control.

This article argues the case for the formation of public-private partnerships at national, provincial and local levels. It should also raise the awareness of facilities managers in government and business of the means by which their co-operation can cost effectively provide the public with quality goods, services and facilities.

However, the greatest challenge for implementing successful PPP's in government is this: experience shows that in dealing with a regulatory body like the Public Sector, new methods and processes such as promoted in PPP's, are almost always written into standard operating procedures that could in turn largely neutralise a PPP's flexibility.

Because best government and business practices are always evolving, PPP's incorporate initiatives of continual improvement linked to a focus on seamless teamwork and performance measures via outcomes. International best practice proves that such strategic alliances will only continue to work well because of the flexibility they offer.

Source: Piet Jordaan Trp (SA)

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