What do innovation, capital, and resources all have in common? They are just a few things that the private sector can bring to the table in public-private partnerships.
By partnering with a private company to execute a long-term contract, government agencies can focus on their goal of best serving the country while relaying the technical and systemic issues to industry experts.
An investment in the future. Outdated technology, legacy systems, and mismanaged information in government agencies can lead to high-risk situations, fraudulent acts, and over-complicated processes.
Government agencies are not always capable of tackling complex technological issues on their own and should consider achieving systems modernization by working with a skilled and experienced contractor.
To better illustrate the viability of public-private partnerships, let us consider 7 reasons why PPPs are effective, efficient, and successful:
1. Compared to the traditional pay-as-you-go financing models in traditional government contracts, fixed-fee systems in PPP models promote financial sustainability and high quality services over the lifetime of the project.
Because the private partner contributes most of the funding for infrastructure in PPP models, their incentive is not to make money right away but to build and maintain infrastructure that will last a long time and eventually pay off financially. The government’s fixed fee for the project will incentivize the private sector to continuously maintain and update infrastructure for the lifetime of the partnership because a successful and sustainable solution will yield further opportunities and partnerships.
2. The commitment to a set time-frame ensures that both partners work together to conduct business in an efficient and timely manner.
If deadlines are missed, the private contractor may be penalized or even removed from the job without reimbursement for their services. Therefore, businesses are incentivized to deliver their services on time or even ahead of schedule.
3. PPPs take risk away from the government agency and puts it in the hands of private partners who are best able to manage it.
Because the private sector is the primary funder for new infrastructure, they bear the risk if the project fails or succeeds. However, because they are deemed to be the best choice to manage that risk, they are eager to apply their experience and expertise to public sector infrastructure knowing that a successful outcome will yield more opportunities and a return on their initial investment.
4. PPPs are not only focused on solving problems but on making sure that the solution is sustainable and maintainable.
Public-private partnerships are focused on the path as well as the outcome. In other words, PPPs are investing in the building, maintaining, and future lifespan of infrastructure. With investing large amounts of capital into projects, the private sector has a vested interest in building and operating high quality infrastructure that will not only give a future return on investment but will also be easily maintained and operated beyond the life of the partnership for the benefit of both sectors.
5. With a goal of modernizing systems that can easily be sustained after the partnership ends, PPPs work to produce systems and processes that are user-friendly, safe, technically sound, and can be affordably maintained moving forward.
PPPs allow private enterprises to utilize innovative strategies and maintain operations over the concession period. Because private contractors want their systems to be easily maintained and cost-effective, they incorporate modern technology and long-term solutions when building and planning new infrastructure in a PPP model.
6. Long-term projects allow private partners to consistently manage and uphold the maintenance and operations of complex projects.
Typical government contracts have a short time-frame and their purpose is to build or fix small-scale infrastructure. However, these small projects and fixes add up and require continuous maintenance and high costs for government entities. In a public-private partnership, the private partner agrees to operate and maintain the infrastructure over a set period of time for a fixed fee, and gives the private sector the authority to incorporate innovative and efficient practices.
7. PPPs are at the forefront of modernizing systems and practices in the government by utilizing innovation and capital to deliver the best services and outcomes.
Public-private partnerships are not one-stop shops. They are long-term agreements between the public and private sector in which each agrees to work together to achieve a successful outcome.
Because private contractors bear the risk, financial stake, and primary responsibility over PPPs, they are incentivized to utilize best business practices and invest in high quality resources that will improve, modernize, and transform government processes and systems.
Government agencies should consider developing and partaking in public-private partnerships because these relationships can lead to even greater opportunities and greater collaboration between the public and private sectors in the future.
To learn more about public-private partnerships and RG's consulting services, visit www.teamrg.com.