Emerging insights from Italy and its Next Gen EU implementation plans.
During the first wave of the COVID-19 pandemic, when Italy, like many other countries across the world, were scrabbling to find enough masks and ventilators, Italian public and private organisations showed an extraordinary ability to forge new collaborations. In the academic glossary, these partnerships have been referred to as “hastily generated”, i.e. created in a hurry and without preconceptions, with the sole objective of giving an immediate response to the looming health crisis. Such experiences have been welcomed as a renaissance of the public-private collaborative model (Vecchi et al. 2020a). In truth, due to a series of severe criticalities that arose over the last 20 years in a number of public-private partnership (PPP) contracts, and not just in Italy but also elsewhere, there has been consistent deterioration and politicizing of the relationship between public and private actors (Willems and Van Dooren 2016; Hodge & Greve, 2017). An example of this is the collapse of the Genova bridge, operated through a concession contract (Cusumano et al. 2020). To compound this, the lack of strong scientific evidence and the mixed outcomes achieved have resulted in a PPP slowdown. In the UK, for example, after a revision of the Private Finance Initiative (PFI) policy and the introduction of PFI2, in October 2018 the government there declared that they would no longer use PPP for new project delivery (HM Treasury, 2018). Also in Italy, PPP contracts were hindered, especially in the healthcare sector (Vecchi et al. 2020b) and quite often the preferred alternative to PPP was to take no action whatsoever. Despite this, it seems that alternatives to PPP are still vague, especially for investments funded by taxpayers, such as in healthcare (HM Treasury, 2020). Indeed, by looking at EU regulation, which is one of the most advanced for public contracts, there are two frameworks for delivering investments: the traditional procurement and the concession model. Since a concession is based on the allocation of (an operating) risk to the private counterpart (Directive 2014/23/UE), a PPP, for its bundled nature, can be considered a concession contract (Vecchi et al. 2021). Therefore, if the goal is to involve private capital to finance public projects with certain degrees of incentive to achieve performance and strategic goals (such as on time, on budget and on quality investment and innovations in the delivery of services), a concession/PPP contract can still prove useful in helping to close the existing infrastructure gap, especially for social infrastructure (Fransen et al., 2018). The Covid-19 pandemic has dramatically expanded such a gap, quantifiably, and only in the European Union to the sum of 500 bn euros (2018 prices), according to a study carried out for the European Investment Bank[1]. Over and above that, PPP can attract those economic players and investors that consider society and societal challenges the cornerstone of their new competitive business strategies, in allocating additional capital and innovative capacity. We live in a unique period, in which corporations and investors are increasingly engaged in the creation of public value, through ESG and Impact Investment strategies (Vecchi et al. 2022; Vecchi 2022). That being so, an alignment between the need of the public sector to identify more sustainable, innovative and effective solutions and the willingness of the private sector to invest in this direction seems to be possible.
Today in Italy, PPP is regaining interest, especially in the healthcare sector but not only here, in order to respond to current social, digital, environmental and economic challenges and seize opportunities offered by the Next Generation EU (hereafter Next Gen), not just to increase the pool of public money but mainly to quickly implement new investments and services. Two mega digital projects have been recently announced to be developed in PPP, as part of the Next Gen plan: the national cloud and the national telemedicine platform. In addition, the Italian Treasury has appointed the National Development Bank (Cassa Depoisti e Prestiti), with a strong focus on PPP, as the key advisor for the implementation of the Next Gen plan (the so called National Plan for Recovery and Resilience, in Italian PNRR).
For that reason, it seems obvious that a new approach to PPP will emerge and as something more in line with collaborative solutions with the market, that go beyond the pure mobilisation of private capital for hard infrastructure, which was the main (macroeconomic) argument for PPP in the past - although PPP can be crucial to mobilise the enormous available private liquidity.[2]
Confronting the huge need to quickly spend the Next Gen budget, Italian public authorities seem to have successfully overcome their fears and scepticism towards PPP, which, before the pandemic, hindered the development of partnership models. However, such a vibrant pro-collaborative mood may bring impending doom if Italian authorities are unable to use PPP strategically. Indeed, a PPP is not just an alternative procurement route or a way to outsource big bundled contracts to the market, as has been intended so far across the world, but should be conceived as an approach to achieve more challenging results, thanks to a system of incentives for the market to generate innovation, change, and public value, as co-shared bold goals. These are realistically the truly challenging goals beyond Next Gen and the European structural and investments funds, which Italy is one of the main beneficiaries of. To realise a strategic approach to PPP, rather than a contingent one (i.e. to quickly spend the EU budget and deliver the projects negotiated with the EU Commission), it is salient to re-invest in public management and public sector leaders after a decade dominated by severe spending reviews and a return to bureucracy and formalism. It requires public managers with vast knowledge of sociteal needs, vision, leadership and project management skills, able to face the responsibility dictated by urgency and risks inherent the social innovation and value creation, capable of interacting with the market and acting as sophisticated buyers, i.e. challenging the market to identify and experiment new, sustainable and measurable collaboration paths, according to the motto “horses for courses”. This is at least a priority when the PPP is applied not just to hard infrastructure development but especially to public service innovation. Only in this way will it be possible to create widespread legitimacy, trust, and capacity (Casady et al. 2020) which are critical to make PPP a future-proof approach. Public private collaborations will be given true longevity only if authorities, not only in Italy, are able to use PPP/concession contracts strategically, based on renewed collaboration and alignment with the private sector, beyond mere short-term goals, as either quick spending or macroeconmic arguments, in a more “horses for courses” approach, and leveraging on ESG/Impact investing market strategies. The success of PPP depends also on a renewed approach in private management, whose challenge is to better understand public sector priorities and how to truly generate public value. To do this it will be salient to promote and sustain an osmosis between public and private managers to support a co-evolution towards a public-value management. In many countries and not only in Italy the tenedence is to understimate the capabilities of public managers, which do exist and can contribute to make the private sector more resposive and ready to a new approach to PPP.
References
- ABI (2020). Economia e Mercati Finanziari-Creditizi, Rapporto mensile ABI, Settembre 2020, Attività finanziaria delle famiglie, p. 11-12.
- Capgemini (2021). World Wealth Report. Available at: https://worldwealthreport.com.
- Cusumano, N., Siemiatycki, M., & Vecchi, V. (2020). The politicization of public–private partnerships following a mega-project disaster: the case of the Morandi Bridge Collapse. Journal of Economic Policy Reform, 1-17.
- Casady, C. B., Eriksson, K., Levitt, R. E., & Scott, W. R. (2020). (Re)defining public-private partnerships (PPPs) in the new public governance (NPG) paradigm: an institutional maturity perspective. Public Management Review, 22(2), 161–183.
- Fransen, L., Del Bufalo, G., & Reviglio, E. (2018). Boosting investment in social infrastructure in Europe. Report of the High-Level Task Force on Investing in Social Infrastructure in Europe, Luxembourg, The Publication Office of the European Union.
- HM Treasury. (2018). Private Finance Initiative (PFI) and Private Finance 2 (PF2).
- HM Treasury. (2020). Infrastructure Finance Review: Summary of consultation feedback.
- Hodge, G., & Greve, C. (2017). On public–private partnership performance: A contemporary review. Public Works Management & Policy, 22(1), 55–78.
- Vecchi, V., Cusumano, N., & Boyer, E. J. (2020a). Medical Supply Acquisition in Italy and the United States in the Era of COVID-19: The Case for Strategic Procurement and Public–Private Partnerships. American Review of Public Administration.
- Vecchi, V., Casalini, F., Cusumano, N., & Leone, V. M. (2020b). PPP in Health Care—Trending Toward a Light Model: Evidence From Italy. Public Works Management and Policy, 25(3), 244–258.
- Vecchi, V., Casalini, F., Cusumano, N., & Leone, V. M. (2021). Public Private Partnerships: Principles for Sustainable Contracts. Palgrave Macmillan.
- Vecchi, V., Casalini, F., Cusumano, N., (2022, fortcoming), Public Private Collaborations for Long Term Investments: Converging Towards Public Value Generation. Edward Elgar Publishing.
- Vecchi V., (2022 forthcoming), Public Private Partnership for sustainable development, in Schedler K. (ed) Encyclopedia for Public Management, Edward Elgar Publishing.
- Willems, T., & Van Dooren, W. (2016). (De) politicization dynamics in public–private partnerships (PPPs): Lessons from a comparison between UK and Flemish PPP policy. Public Management Review, 18(2), 199-220.
Notes
[1] |
See: Infrastructure gap and drivers for growth, available at https://www.sdabocconi.it/upl/entities/attachment/EIB_Conference%20paper_1_Infrastructure%20gap%20and%20drivers%20for%20growth.pdf |
[2] |
Despite the pandemic crisis, in 2020 private liquidity has risen by 7.6%, reaching a historical peak of USD 79.5 trillion (Capgemini, 2021). In Italy, the private liquidity has been estimated in EUR 1.68 trillion, equaling the national GDP (ABI 2020) |