13 December 2018

Book Review: Governing Public Private Partnerships

13 December 2018

One of the primary responsibilities of governments the world over is to provide public services to their citizens, including through infrastructure projects. However, governments are often faced with limited resources, constraining their ability to finance and deliver infrastructure on their own.  Thus, it is often necessary to invite a private sector party to jointly provide the services in partnership with the public sector.


Public-Private Partnerships (PPPs) used for infrastructure service provision can potentially be an attractive contractual instrument, providing the government with an opportunity to mobilise private resources to provide long-term infrastructure services to its citizens. However, the long-term nature of PPP contracts and the increased role of the private sector in infrastructure service provision through PPPs has proven a challenge for some governments to manage, especially in light of the short-term nature of political cycles.


Governing Public-Private Partnerships by Joshua Newman, a lecturer in the School of Social and Policy Studies at Flinders University in Australia, offers lessons learned on the importance of promoting strong capacity and active involvement by the public sector in PPP transactions to avoid contractual failure. In this book, the author argues that the public sector has an important role to play in ensuring the success of PPP projects, by actively learning, collaborating and managing the complex PPP policy networks amongst the various parties involved.


By comparing two infrastructure projects as case studies, the book is not trying to reach a general conclusion or recommendation as to the best way to govern PPPs. Instead, it highlights important lessons learned from these two projects and proposes actions to be taken by the public sector to ensure a sustainable and successful relationship between the parties in PPP projects. The author uses stakeholder interviews, as well as the analysis of primary documents and published secondary sources of literature to support his argument.


The case studies discussed are the Canada Line project in Vancouver, which the author considers to be a governance success story; and the Sydney Airport Rail Link project in Sydney, which the author argues is less successful. These two projects were chosen because of their similar objectives. i.e. a rail connection between the local airport and the city’s central business district, and because they each raise issues frequently encountered in complex PPP transactions


The book consists of eight chapters that can be categorised into three main sections. The first part, Chapters 1 to 3, provides context, definitions and literature citations related to governance in PPPs.


The first chapter of the book discusses the changing role of the state in providing services to its citizens. The increasing role of the private sector as a result of marketisation and deregulation has shifted the government’s role from controlling to regulating the economy. Governments need to find a balance to ensure public sector accountability, and to efficiently and effectively utilise the profit-oriented private sector. This chapter sets the context on why the governing role of the public sector is so important for the delivery of successful and sustainable PPP projects.


In Chapter 2, the author touches on the literature gap regarding the non-economic analysis of PPPs, including governance, that will be discussed in the rest of the book.


Chapter 3 specifically discusses governance, its role in the success and failure of PPPs, and how the public sector can ensure successful partnerships. The author argues that public sector failure has more tangible consequences and is easier to detect, while success can be more elusive with less tangible consequences. Failure also has greater political consequences than success.


For these reasons, the book focuses its case study analysis on the conditions that could lead to the failure of PPP transactions and what the governments should do to mitigate against such failures. The author also discusses at length the nature of policy networks in governing PPP arrangements and the role of the government in PPP partnerships. Based on the literature reviewed, the author describes the policy network as “horizontal and dynamic regimes … that function under a convention of implied rules rather than binding contract obligations”. The analysis arrives at the conclusion that governments have a direct role to play in governance to ensure sustainable partnerships. This, of course, also requires private sector participation, as the author states: “governance arrangements, by definition, require the active cooperation of both market actors and governments at the same time”.


The second part of the book, consisting of Chapter 4, details the two case studies. In this chapter the author discusses the institutional and contractual arrangements, the projects’ financial structures and timelines, and the dynamics of the project stakeholders throughout the projects’ development. The author argues that the existing body of literature lacks analyses on the mechanisms that determine the success or failure of the partnerships in PPP contractual arrangements.


The last part of the book contains the author’s key messages. Chapters 5 to 7 discuss in detail the methods of strategic policy leadership employed by the public sector in the Canada Line project, which, the author argues, were the difference between success and failure in the governance of that project. The author discusses at length how each of the methods used in the Canada Line project were missing in the Sydney Airport Link transaction, which he claims lead to a failure of governance in the latter project.


On the topic of supporting and managing policy networks, a key success factor in the Canadian case was the subtle way the public sector maintained authority. The public sector, in this case the provincial government, “supported the information sharing, debate and cooperation among network actors, all while positioning itself as an ultimate authority with power to step in when necessary.”  According to the author, this was not the case in the Sydney project, where he asserts that the public sector frequently seemed to ignore other project stakeholders, and attempted to manage the project alone, resulting in a highly adversarial and partisan approach to the project. The key message is the importance of the public sector taking the lead in fostering a policy network of project stakeholders. As the author puts it: “the governance of PPPs requires a strategic, activist state that is mindful of its non-state actors.”


In the view of the author, policy-learning ability is another key factor in ensuring the success of PPP partnerships. Learning from past experiences in different jurisdictions on similar projects, or from international leading practices, can make a major contribution to the success of a project. The Sydney Airport Line project, considered one of the earliest PPPs when it was announced in 1990, did not have the advantage of the availability of lessons learned from international experiences. The project resulted from an unsolicited proposal from the private sector, another new practice at the time and one that continues to be difficult to implement. Because of these factors, the private sector, in the view of the author, had too much control in the project, leading to governance failure. In the author’s words, “allowing the private partner too much free reign in a PPP is a recipe for governance failure”. However, the author also recognises that “the problems that Airport Link and other projects from the same time period experienced were necessary steps in the global evolution of PPPs.”


The author argues that the third key success factor is collaborative project management. The public sector in Canada established an independent project management company, Canada Line Rapid Transit Inc. (CLCO), to institutionalise cooperation among stakeholders in the project, effectively a foundational decision-making body for the project. This proved to be effective in resolving conflicts by brokering potential solutions between different stakeholders. On the other hand, the Sydney Airport Link project did not have a central collaboration organisation, making it difficult to solve conflicts in stakeholder interests, especially during the operating phase, where major problems materialised because of over-optimistic ridership forecasts.


It is difficult to compare non-economic factors that determine the performance of any two projects within the same jurisdiction in the same timeframes, let alone to compare projects from different jurisdictions from different timeframes. The author has made a sound attempt to do this, resulting in three important key messages for infrastructure practitioners and policy-makers.


There are instances where the author has, arguably, over-emphasised the contrast between the two projects, and it would have been more helpful if the book provided a more balanced treatment of both the shortcomings of the Canadian transaction and the successes of the Australian project. Nevertheless, the author has provided a service in identifying some key messages for a successful PPP contractual arrangement.


The book has made it clear that learning from others’ mistakes is important for PPP governance to be successful. This is one area where the GI Hub plays an important role as a knowledge hub for the global infrastructure market, by providing leading practices in infrastructure, reflecting lessons learned on a worldwide basis.


Author: Joshua Newman

ISBN: 9780773549999

Publishing House: McGill-Queen's University Press

Publication date: June 2017

200 pages