Building Public-Private Policy through Good Design

Despite its fundamental and multifaceted role in maintaining national growth and economic health, infrastructure in the United States has not received an adequate level of investment for years.

October 2015 | by David Delaney

Political dysfunction, a challenging fiscal environment, greater project complexity, and the sheer size of the need across different sectors are forcing leaders across the country to explore new ways to finance the investments and operations that will grow their economies over the next decade. Part of this exploration means new kinds of agreements between governments at all levels and the private sector to deliver, finance, and maintain a range of projects. Beyond simplistic notions of privatization, the interest is in true partnerships between agencies, private firms, financiers, and the general public. Many nations already successfully develop infrastructure in this manner today.

These public-private partnerships (PPPs) are alternately framed as a panacea to all of America’s infrastructure challenges or a corporate takeover of critical public assets. In reality, they are neither. A well-executed PPP is simply another tool for procuring or managing public infrastructure—albeit a new and increasingly popular one. The growing interest can be attributed to a number of factors, including tightening budgets, increased project complexity, better value for money, the desire to leverage private sector expertise, and shifting public sector priorities. However, this surge of interest is not matched by broad public sector understanding of the PPP landscape.

Private Capital, Public Good

Infrastructure PPPs are technically, economically, politically, and contractually difficult arrangements. Despite these challenges, they are increasingly a topic of conversation in congressional hearings, state forums, local meetings, and are featured at conferences and symposiums around the world. This enthusiasm for a complex procurement model reflects growing demand for infrastructure investment, the search for new tools, and also a great deal of over-optimism. In a tax averse and politically gridlocked environment, PPPs are appealing as abstract solutions to very tangible infrastructure problems.

Yet PPPs are not a substitute for direct public sector investment in infrastructure and in fact are highly dependent on public revenue and expertise to operate effectively. The real opportunity for public benefit in a PPP lies in the innovation, risk sharing, and value to the taxpayer that these agreements are capable of providing. Better commutes, access to economic opportunity, more efficient energy distribution, world class public buildings, more resilient water systems, and a wide range of other benefits are imminently achievable through carefully arranged PPPs.

These benefits can be difficult to achieve and only a subset of projects will ever have the scale, revenue, and political support to become a PPP. Creating an accountable, effective, and lasting PPP environment requires both the work of highly competent public officials and the strategic use of precious public resources. However, taking the time to develop these processes will guide private capital towards the greater public good.

 

Executive Editor

 Ms Anna Sullivan

Ms Anna Sullivan