How to make PPPs better: Just saying they are bad does not get you there

I have just been reading an article in public finance international (http://www.publicfinanceinternational.org/news/2018/03/eu-public-private-partnerships-not-economically-viable-say-auditors?utm_source=Adestra&utm_medium=email&utm_term=). It tells us that the European Court of Auditors  suggest that PPPs lead to inefficient and ineffective spending. A report from the UK’s National Audit Office in January this year ( https://www.nao.org.uk/wp-content/uploads/2018/01/PFI-and-PF2.pdf) was also critical of this procurement methodology.

From my own experience in procuring and  negotiating PPP contracts, and in helping achieve complicated variations  to these transactions and sorting out some very difficult disputes, much of what is said rings true. As The ECA said ‘projects were poorly prepared by public partners and…contracts with private concessionnaires were signed before relevant issues had been solved.’  And this, coupled with poor or under resourced contract and project management, goes to the heart of the problem.

Many public infrastructure projects are under intense political pressure to get started. There is a shortage of competent project management teams. Scarce resources often lead to the disbandment of project teams once the deal is signed: you cannot sign and forget complicated contracts, skilled and knowledgeable people have to keep on top of them.

Carillion has been a high profile private sector partner in PPP and outsourcing projects in the UK and other countries. Its  recent very high profile collapse  has been used to suggest that these deals are bad. But are they? Carillion’s investors will absorb much of the loss. Maybe some contracts had been signed ‘before all the issues had been resolved’. It would seem that close government oversight of Carillion as major supplier may not have been as close as originally planned.

What all of this comes down to is that if you intend to procure a very complicated and expensive project you should be clear what you want, specify that before you contract and keep a careful eye on the contract. That applies whatever the structure of the deal.

 

The reports highlight the needs to do things better, not to start all over again.


Advising in PPP Healthcare Workshops in Ankara

 The UK Embassy in Ankara has arranged, through Strategic Healthcare Planning  (www.shp-uk.com), to provide workshops for key actors in Turkey’s hospital PPP programme. This programme has 17 very significant projects in progress with 2 hospitals now open and many more in the pipeline. It will make a major improvement to healthcare provision in Turkey. The first workshop took place last week in Ankara attended by representatives of government departments, consultants and project companies responsible for delivering the long term serviced hospital contracts.

The contracts have many similarities with the so called ‘UK model’ crucially in providing an availability based payment mechanism with inbuilt incentivisation to meet key requirement to keep the hospital operating to high standards. There are, naturally, differences to reflect the requirements, available resources and sheer ambition of the projects. The workshops were led by Jeremy Cox from SHP and I really enjoyed engaging with participants in working through practical and legal issues arising in respect of commissioning and operating hospitals under this new model.