Public-private enterprise
In some situations, governments may not be in a position to provide a good or service for financial or policy reasons, even though this may be a government service. In this case they may create what is termed a 'public-private partnership' (often referred to as PPPs). This is where the government enters into a partnership with a private firm to build/develop the good or service and then perhaps to go on to provide or operate it on behalf of the government.
Examples of public-private partnerships include:
- International AIDS Vaccine Initiative (IAVI), which is a global non-profit making NGO promoting the development of development of vaccines to prevent HIV infection and AIDS. IAVI collaborates with the public and private sectors in both industrialised and developing countries.
- The Canada Line is a rapid transit line in the Metro Vancouver region of British Columbia, Canada. Opened in August 2009 it was built as a public-private partnership. Funding was provided by both government agencies and private partners.
Public contributions came from the following sources:
- Government of Canada: $450 million
- Government of British Columbia: $435 million
- Vancouver Airport Authority: $300 million
- TransLink: $334 million
- City of Vancouver: $29 million
Advantages and disadvantages
PPPs have been welcomed by many governments, but have also had their fair share of criticism. So what are their costs and benefits?
Benefits
- PPPs may enable to government to develop public assets faster and at lower cost to the country's taxpayers than by conventional public procurement.
- They may reduce the borrowing burden for government as the money can be raised by private firms
- PPPs allow for private sector management skills to be brought to bear on the development, management and operation of the good or service
- PPPs may reduce the cost per unit of providing the good/service as private firms may be able to develop and operate the project more efficiently
Costs
- PPPs must include a fair return for shareholders and so the overall cost may not eventually be as low as was first was thought
- Firms will not be required, unless the contracts are very specific, to take account of social needs and social objectives in their provision of the good or service
- PPPs often have very high costs associated with their provision for legal and contractual reasons. The contracts developed can be very complex and may take significant time and cost to draw up.
For more detail, why not have a look at the Wikipedia article on the Public Private Partnership. You can do that in the window below, or follow the previous link to open the article in a new window.
