The growth of PPPs in so many countries raises a number of issues which form
the basis of this volume. The first and most obvious question is: from where did PPPs and the idea of private financing and operation of infrastructure come? At one level, the answer is very simple. The idea is not a new one. Toll roads and toll bridges have been around since antiquity. In Britain and the United States in the eighteenth and nineteenth centuries, over 2500 companies were chartered and incorporated to develop private turnpikes. They in turn came under competitive pressures from the next private infrastructure devel- opment – the railways. PPP-type arrangements have been used in France to privately finance public infrastructure since the seventeenth century, when the French concession model was pioneered. In the second half of the nineteenth century, France extensively used concessions to finance its infrastructure development. Railways, water, electricity and tramways were all designed, constructed, financed and operated by private enterprises and banks. Thus the question really is one of what has caused a regrowth of PPPs in recent decades, which we trace to changing attitudes to public services delivery, dissatisfac- tion with conventional procurement and construction methods, and the devel- opment of the project financing model.
However, changing attitudes to infrastructure have also played a part, prompting a second question: what is the role of the private sector in infra- structure? The answer is almost axiomatic in the United States where PPPs must be viewed against the historical background of ‘privatism’ that has domin- ated thinking in the US since the early nineteenth century (Beauregard, 1998).
Privatism is the presumption that economic activity should be left to the market; ‘a belief that private institutions are intrinsically superior to public institutions for the delivery of goods and services’ and ‘a confidence that market efficiency is the appropriate criterion of social performance in virtually all spheres of community activity’ (Barnekov et al., 1989).
In Europe, no such equivalent tradition exists. In the United States, the role of government has been described as one of creating coalitions among diverse interests in a fragmented and pluralist system. In Europe, government is seen as a political and economic actor in its own right, with a clearly defined role as custodian of the broad ‘public interest’ that is ‘more than a mere aggrega- tion of private interests and compromises among them’ (Keating, 1998, p. 166). There are also differences in government structure. In the United States, the various state governments have a high degree of political and func- tional independence from the federal government and in turn local govern- ments have a high degree of autonomy within the individual states. By contrast, in Europe government is much more centralized, and the same is true of the public service and administrative units. European countries have large, professionalized and rather unitary bureaucracies at both a central and a local level, with strong linkages between the levels, whereas the United States has a fragmented bureaucracy. American state and local government
administrations are thus less dependent on senior governments, but by the same token they are more dependent on private capital – hence the need for them to mobil-ize PPPs.4
Some, like Keating, would argue that these very different starting points and traditions ought to lead European states to be very wary of PPPs, the rush to which is dismissed as ‘a naïve adulation of American privatism’ (ibid., p. 168), and ‘often no more than a very expensive way for government to borrow money’ (p. 170). Thus Keating concludes:
It may be that, where local government has a weak resource base and a problematic bond rating, and faces mobile capital, it will have no choice but to go aggressively into public–private partnership. This is the case of many American jurisdictions.
The European state, however, is more autonomous of private capital and potentially better able to define investment priorities. It has less need to rush into American- style partnerships and, where it does enter into partnership, should be more able to define its terms. (ibid., p. 170)
Yet the reality would seem to be different. Consider, for example, the Netherlands. Despite the fact that a PPP is not a recognized concept in Dutch law, the Netherlands has put in place a framework for PPPs including a dedi- cated PPP unit, the ‘Kenniscentrum’ or Knowledge Centre which was set up in 1999 within the Ministry of Finance (Linklaters and Alliance, 2001). Three major PPP projects have reached the procurement stage: HSL (the high speed train line between Amsterdam and the Belgian border), the A59 (between Oss and Den Bosch) and Delfland (new Hamaschpolder waste water purification installed by DBFO). Partnerships also lie at the heart of current EU economic development and competitiveness initiatives because they are seen to facilitate innovation, bring diverse interests together and enable public authorities to cohere around common objectives (Jacobs, 1997), and the development of trans-European transportation, telecommunications and energy infrastructures is recommended for major partnership programmes (European Commission, 1995). Since the late 1980s, the European Investment Bank (EIB) has approved more than 100 projects in EU countries which can be considered to be PPPs in a broad sense, and as of October 2003 another 50 projects are in the pipeline (European Investment Bank, 2004).
In the United Kingdom there is no strong tradition of organizing public–private relations through joint participation in institutions, and PPPs are often dismissed as a byproduct of a particular brand of ideological Conservative thought (despite the fact that the PPP programme has expanded under the Blair Labour government). Nonetheless, the ‘nationalize/denationalize’ cycle and the
‘privatize or not’ argument that lasted for much of the post-war period would appear to have given way to a more considered debate about how best to ensure that certain organizations, irrespective of whether they are in public or
private ownership, can be made to work in the public interest (Harding, 1998). This has led to a great number of experiments with different forms of PPP, covering virtually the whole gamut of government activities. The description PPP has now come to be used as an umbrella term for arrange- ments involving the private and public sectors, with PFI projects and DBFO contracts one sub-set of such arrangements.5
Nevertheless, Keating’s misgivings about PPPs are shared by many in academic circles and in addition the general public remains deeply sceptical about, and even hostile to, PPPs. As the Commission on Public Private Partnerships (2001, p. 23) notes, the ‘public good, private bad’ position when it comes to public services provision commands a great deal of emotional support. Such attitudes prompt a series of questions. What is wrong with traditional public procurement methods? Can PPPs be structured to achieve value for money, and how is this to be done? How are risks in PPPs best to be allocated?
Another set of questions relate to the governance of PPPs. The fact that one of the participants in a PPP is a public body creates a need for the inclu- sion of mechanisms of accountability quite different from those that would exist if all the participants were private. Yet, one reason for a partnership agenda is to break away from the political and bureaucratic processes that might exist if the activities were purely public. How are these potentially conflicting demands to be balanced? Can governments transform themselves from purchasers of infrastructure assets to managers of long-term contractual relationships? What are the administrative requirements needed for them to do so?
In this volume we address many of these questions and more, not only to try to set the record straight on some issues, but also to provide a compre- hensive overview of PPPs, what they are and how they work. A feature of the book is that it seeks to combine an academic perspective on these issues with practitioner-based experience of organizing PPPs and advising govern- ment bodies. This experience is reflected directly in some of the examples given, and while the whole volume draws on this practical knowledge of the PPP market, there are also seven specific case studies. Two examine road projects (Chapter 2), one relates to prisons and custodial services (Chapter 5), two consider hospital projects (Chapters 5 and 6), and the other two case studies look at water projects (Chapters 7 and 9). Reflecting the diversity of models that make up the partnership approach to infrastructure services delivery, the case studies cover a variety of PPP approaches in some differ- ent countries.