governments can expressly abrogate contractual commitments and nullify contracts by passing legislation. Second, a whole range of government changes, such as environmental policy, health and safety provisions, transport, regional development, can alter the franchise value of a concession to the private investor. Add to this the difficulty of imposing financial conditions on the public body, and either seizing the assets or suing the public agency involved, and there may be some reluctance on the part of the private firm – or its backers and investors – to bear public payment risk. In these circum- stances, careful design of the contract is needed. Some of the conciliation and risk mitigation elements are considered in later chapters.
In the meantime, we may note that although DBFO/BOT arrangements were refined in transport projects, the techniques carry over and form the basis of PPPs in other infrastructure applications. As Adrian Smith (1999) observes:
‘The operation of a toll road is not conceptually very different from operating a railway, a hospital or a prison, in that all must provide specified services to a guaranteed and measurable standard within a predetermined budget’
(p. 138).
industry is marred by adversarial relationships. Earlier contracting methods and project management practices, whether involving private or public sector projects, have had the effect of putting the participating parties – owner, designer and contractor – into adversarial situations in which common project objectives get lost. This failure of communication and cooperation leads to disruptive conflicts, the results of which are cost and schedule overruns, lost time, wasted money, poor quality, low morale and ultimately litigation.
Partnering, by contrast, centres around conflict management, team building, trust, commitment and mutual goals. The studies on partnering suggest ways of bringing about these results.
Crowley and Karim (1995) define partnering as a means of resolving inter- organizational conflict, with two or more organizations maximizing resource effectiveness in achieving common project objectives. The key elements intro- duced into the relationship are trust, commitment and a shared vision. Trust is important for confidence and encouraging a communication of ideas.
Commitment allows for mutual improvements in technology and methods.
Achievement of a shared vision comes from consensus in realizing objectives in common. A successful partnership is marked by openness, innovation, equity, shared risk and conflict resolution through problem solving. While partnering can apply to both public and private sector entities, the authors note that public sector agencies may have difficulties in overcoming traditional bureaucratic structures if they are to partner successfully.
In the other major article on the topic, Wilson et al. (1995) argue that part- nering represents a significant cultural change for most organizations. A major hurdle is that project partnerships are single events and do not in themselves generate the cultural change mechanisms required for the partnering process.
The authors seek to move partnering beyond a single-event project arrange- ment, and investigate partnering from the strategic aspect of a partnering process embedded in an organizational change model in which strategic change is driven by a transformation leadership team. Such a team is respon- sible for defining the goals to be achieved from partnering, managing the part- nering process and undertaking continual diagnosis, coordination and problem resolution. The aim is to institutionalize change by placing common goals, trust and teamwork at the heart of all contractual agreements for construction.
But for this to happen an appropriate framework is needed to initiate and implement change within the organizational structure of the partnership.
This framework is not simply the result of appointing people to work together in coordinating a project. The idea is to wrap the major participants into an alliance that centres attention on the project, and not on the individual parties involved, in such a way that the resulting culture necessitates that these organizational barriers must be modified. Partnering of this form is especially important in a PPP because flexibility and permeability tend to be greater in
private sector organizations, whereas in public sector bodies the boundaries tend to be more rigid, and overcoming them can be difficult. Also, those on the lower rungs of the public sector ladder may not share the enthusiasm for
‘privatism’ of ministers and senior officials.
Partnering is not a contract as such; nevertheless a partnering approach is usually supported by a written partnering agreement, a non-contractual agree- ment, signed not by the organizations but by the actual people who will be directly involved, which sets out the essence of the parties’ mutually agreed obligations. Smith (1999) gives an example of what a partnering agreement might look like for a BOT tolled road concession (see Table 3.2). It would be normal for the parties to employ an outside facilitator to aid the process and help formulate the agreement. The role of the facilitator is to help the parties to develop the required ‘team ethos’ to articulate and fashion the partnering agreement, and to help the parties to stick to the bargain they have made by recognizing that every contract incorporates an implied covenant of good faith Table 3.2 An illustrative project partnering agreement
Partnering agreement
We, the partners of the Blanktown Bypass toll road concession, agree to work together for the whole period of the concession in such a way as to ensure the design, construction and operation of a high quality project. We hereby affirm that we are one team, and that we are jointly committed to achieving the following objectives:
• Design, construct and operate a high quality scheme to the continuing satisfaction of all concerned.
• Achieve or better all programme targets.
• Maintain an effective team relationship.
• Operate effective communications systems.
• Resolve any contentious issues at the lowest possible level in a timely and progressive way.
• Achieve or better all environmental objectives.
We also jointly agree to use our best endeavours to develop specific action plans to improve problem resolution procedures and to ensure successful completion of the project.
Signed:
Source: Smith (1999, p. 137).
(Hellard, 1995). Partnering agreements are part of the alliance approach that partnering represents – they are not needed in PPPs where the partnership arrangement itself serves this purpose, and cements in place the same shared goals.
Perhaps the best way to think of the transition from partnering to PPPs is to adopt Peters’ conception of partnerships as ‘institutions’ (Peters, 1998). Rather than relying on the bargaining of individuals in a series of negotiations to generate collective action, the entities involved instead choose to create an organization (or an ‘institution’) for the purpose of the partnership. Instead of there being transient relationships among governments and private sector actors,
these partnerships can be conceptualized as stable institutional structures that are governed by shared understandings of priorities and values, as well as by sets of rules that have been mutually agreed upon by the two (or more) actors. This stabil- ity and institutionalization can be seen as a mechanism for reducing transaction costs and for facilitating decisions through creating common perspectives on policy.
(p. 19)