The Governance of Public Contracts in Public-Private Partnerships
April, 08 2019 | Editorial office
The joint ESADEgov and Barcelona Chamber of Commerce study analyses ways of improving the governance of public-private partnerships.
The enactment of Law 9/2017 on Public Sector Contracts [Ley 9/2017 de Contratos del Sector Público] was a watershed in the development of public-private partnerships (PPPs) in Spain. This contractual legislation highlighted the importance of the execution or management stage (as opposed to the adjudication stage) and the need to take quality-related aspects into account in the provision of services. Law 9/2017 incorporates social and environmental criteria as well as aspects that favour small and medium-sized enterprises and encourage innovation.
A new study entitled ‘La gobernanza de los contratos públicos en la colaboración público-privada’ (“The Governance of Public Contracts in Public-Private Partnerships”), published by the ESADE Center for Public Governance (ESADEgov) and the Barcelona Chamber of Commerce, underscores the need for a new governance culture that better serves the public interest and enhances the efficiency of public and private measures. The study takes a multi-disciplinary approach to issues bearing on PPP governance in Spain.
Francisco Longo, Director of ESADEgov, commented: “This study analyses the challenges that must be met to ensure good governance of public-private partnerships over the next few years. It springs from the conviction that new demands for quality and equity in the provision of public services require a new strategy based on the complementary nature of efforts by public and private entities.”
Given the challenges faced by public administrations in the 21st century – a period characterised by economic globalisation, demands for public accountability and the need to meet new demands in ways that optimally meet citizens’ quality requirements – it is necessary to rethink how PPPs work and the model on which they are built. The authors of the new study explored the reasons behind EU institutions’ eagerness to foster PPPs, which include the promise of greater social efficiency, greater involvement of the private sector in meeting social needs, and higher-quality public services, as well as the possibility of blunting the impact of the budget cuts associated with the EU-designed stability model.
The social effectiveness and efficiency of public action
At present, good governance is primarily focused on ensuring the effectiveness and efficiency of public action, which bears directly on the debate surrounding the relationship between the public and private sectors in serving the public interest and the need to balance the budget and cut public spending. Consequently, the state is sometimes viewed as a public body that ensures that public needs are met by regulating, managing and controlling the delivery of public services, but without necessarily supplying these services directly.
The social effectiveness and efficiency of public policies largely depend on how these policies are chosen and put into practice. Through public contracting, government bodies implement policies that affect the country’s economic, social and political spheres. These policies may seek to correct certain behaviours by economic agents. When government bodies decide to provide a public service, they take steps to ensure that said service adheres to the principles of affordability, quality and continuity.
Striking a balance between the public sector, the private sector and citizens
Over the last few years, there has been a political and technical debate on how the public sector, the private sector and citizens should interact. This debate must be grounded in a rigorous analysis of the effectiveness and efficiency of the proposed solutions, and PPPs should be viewed as just one of many possible tools for implementing public policies in ways that obtain optimum results. For this to be possible, it is necessary to strike the right balance between the public and private sectors while also guaranteeing legal certainty and trust. These aims and principles are not at odds but rather complement proper public control over and regulation of service provision.
Among the many challenges posed by PPPs is the difficulty of identifying and maintaining objectives that are shared by all stakeholders. The public sector must ensure that private-sector participation in the provision of public services both upholds societal values and legitimises corporate involvement. In this respect, the more values the various stakeholders share, the closer their cognitive position is, given that they share common preferences and beliefs. Communication is essential to aligning the objectives, preferences and beliefs of the public administration, the private companies and the citizens. The quality of the messaging used to define and share clear, specific aims and to convey the over-arching value and impact of a PPP is a key factor in ensuring that the partnership performs well and enjoys social legitimacy.
Transparency, training and leadership
Other factors that affect the success of PPPs are legal certainty, transparency and accountability. Transparency is a key factor in governance, as it affects the public administration's control over the service and user satisfaction with outputs. On the latter point, high user satisfaction helps to consolidate the partnership.
Furthermore, it is vital to prepare institutions for the management of PPPs and to foster a culture of change in order to meet the challenges posed by a new concept of public contracting as a strategic activity with the aim of implementing public policies, boosting the economy and business, and legitimising the political model. Enhancing skills in the field of public contracting is another key success factor for PPP initiatives.
Leadership is another powerful tool for successfully undertaking and developing PPPs. These initiatives require transformational leadership that forges trust among the various stakeholders and combats existing stereotypes of the public and private sectors. Leaders must design outputs and outcomes and help the participants in a PPP to link their own aims with those of the partnership.
Accountability and strategic Planning
International indicators in the PPP field, such as those used by the World Bank, give Spain a lower score for the initial preparation and adoption of PPPs than for contractual procedures and adjudication. Major shortcomings at the various tiers of public administration include the following: (1) lack of documentation justifying the choices made for the production of outputs and the setting of priorities, (2) lack of an “evaluation culture” in the form of cost-benefit analysis, and (3) lack of accountability. These flaws must be addressed to ensure that the right choices are made and the implementation of the PPP is optimal.
The EU has played a key role in ensuring that member states' PPP contracting procedures are transparent, competitive and make the most of public funds. Nevertheless, the EU has focused mainly on the contracting stage and its role has been more limited in the execution and delivery stages. The governance of PPPs requires a thorough reformulation of the strategic planning, execution and delivery stages in a context of economic growth that is both socially equitable and environmentally sustainable, with the aim of striking a new, fairer balance in the distribution of wealth and of rights and obligations.
Video summary: https://www.youtube.com/watch?v=VxriLjH0UXQ&feature=youtu.be