In determining who bears most of the risk of the property for the overall contract, it is necessary to weigh up the risks, and determine their relative importance. The UK experience is that it is very rare that one party will clearly show that they hold all the risks and benefits associated with a property. At a minimum, a qualitative assessment of the risks, plus an assessment of non- quantifiable risks, is required before drawing a preliminary conclusion as to who bears the risks associated with the property. For example, in the majority of cases for social infrastructure projects, demand risk and residual value risk will remain with the concession provider. However, if this division is not straightforward, it will be necessary to quantify, to the extent possible, the importance of each risk and the relative allocation of risks between the conces- sion provider and the concession operator.
So too is probity. Probity refers to uprightness, honesty, proper and ethical conduct and propriety in dealings. In the context of government tendering, these things are protected by ‘due process’. Such due process is one in which clear procedures, consistent with the government’s objectives and the legiti- mate interest of bidders, are established, understood and observed from the outset. All bidders need to be treated equitably and decisions taken in a trans- parent manner that allows them to be subsequently understood and justified.
Probity management rests on a well-constructed plan that fosters an appropri- ate culture and sets out proper procedures to apply between bidders and the public sector bodies. Nevertheless, probity should not rule out interaction between the parties during the tender process, for such contact is often neces- sary if project objectives and value for money are to be achieved.
In many markets PPPs are not yet at the stage where the government and the private sector agree on all risk allocation issues, and there are still signifi- cant commercial issues where the two parties are quite some way apart.
Sometimes it is difficult for the market place to really understand govern- ment’s objectives for a project. It is therefore valuable if the government main- tains a dialogue with the market throughout a PPP project – continually checking market appetite, marketing the project and discussing specific issues on a regular basis. Clearly this type of interaction needs to be consistent with principles of fair and proper conduct, but at the same time probity considera- tions should not in any way preclude such contact and restrict dialogue between parties that are attempting to enter into a long-term partnership.
Development of a unified approach across the range of public sector bodies would help to establish a common set of standards for the management of probity and governing principles for probity advisers and auditors, confiden- tiality and disclosure, and conflicts of interest. Such an approach is needed because government agencies are accountable for the efficient management of public resources, and probity standards help to deliver a clear and open process in which taxpayers can have confidence. They also provide the government’s existing and prospective partners in the business community with the reassurance that they will be treated fairly and consistently in their dealings with the public sector. This in turn encourages a wider field of bids, increased competition and better value for money.
Finally, there is the question of the wider public interest, for government has particular responsibilities and democratic accountabilities with respect to the delivery of services to the community. Quite clearly, the use of taxpayers’
money to pay for the services necessitates that there be checks and balances to ensure that money is spent wisely. It is ultimately Parliament’s right to deter- mine how revenue is raised and spent, and it has created the statutory position of Auditor-General to verify that proper financial standards are being main- tained by the executive branch of government. In Britain and in the Australian
states that have implemented PPPs, the Auditors-General have played a central role in reporting on PPP arrangements, and it seems desirable that this func- tion should be strengthened. However, governments are responsible for more than using taxes appropriately. People need to be treated in a fair and equitable manner, and government has a special duty of care to those citizens disadvan- taged by personal and economic circumstances. For PPPs the issue that has to be addressed is whether public functions can be delegated to private sector entities without losing sight of the expectation of citizens that public services ought to be more than seller–buyer, customer–provider exchanges and serve a larger social purpose (Watson, 2003). Accountability needs to cover equity, probity and access as well as financially responsible behaviour. Behn in his book Rethinking Democratic Accountability (2001) talks about accountability in four senses: accountability for finances, accountability for fairness, accountability for performance and accountability for personal probity (p. 24).
Under a PPP agenda, protection of the public interest can be considered in terms of a number of elements, and a ‘best practice’ framework would allow for a checklist of questions to be answered in the bidding process, constituting a public interest test.16These are:
• Is the project effective in meeting government objectives?
• Do the partnership arrangements ensure that the community can be well informed about the obligations of government and the private sector partner, and that these can be overseen by the public auditor?
• Have those affected by the project been able to contribute effectively at the planning stages, and are their rights protected through fair appeals processes and other conflict resolution mechanisms?
• Are there adequate arrangements to ensure that disadvantaged groups can effectively use the infrastructure or access the related service?
• Does the project provide sufficient safeguards for consumers, particu- larly those for whom government has a high level of duty of care, and/or those in the community who are the most vulnerable?
• Are there safeguards that ensure ongoing public access to essential infrastructure particularly if there is a breach in the contract?
• Does the project provide assurance that community health and safety will be secured?
• Does the project provide adequate protection of users’ rights to privacy?
While there may be a concern that private provision will inherently result in a lesser consideration of public interest matters than may occur under public provision, we would contend that, in fact, PPPs offer an opportunity to expand the level of public interest protection. The traditional model of accountability derives from a particular approach to public administration that emphasizes
the divide between the public sector and the private sector and puts the stress on political control via a chain of relationships through which authority flows from citizens to MPs, MPs to ministers, ministers to civil servants, and civil servants to service providers. Too frequently in practice, however, the line between policy and administration has been blurred; administrative coordina- tion has been flawed; decisions made have often been in secret and not disclosed. What is needed instead is a new framework, which enshrines the highest standards of accountability in line with accepted standards of probity.
PPPs, with their deliberate, step-by-step approach to decision-making, are a good vehicle for bringing this about.