Accountable Strategies blog

A blog about accountability issues in the public, private, and nonprofit sectors

Are public-private partnerships accountable?

Posted by David Kassel on June 12, 2007

For the past decade, we’ve been witnessing the rise of the “public-private partnership,” not only in this country, but around the world.

Neither the public, nor the private, nor the nonprofit sectors can solve our increasingly complex societal problems by themselves, so the P-PPs have come to the rescue.  From the construction of municipal wastewater treatment plants to the establishment of development programs in poorer countries, public, private, and nonprofit players have come together in a spirit of “partnership” to get these jobs done.

So, why doesn’t it work so much of the time?

Two research papers that examine very different areas along the P-PP spectrum nevertheless come to a strikingly similar conclusion: Many so-called P-PPs are not really partnerships at all and fail to hold the “partners” truly accountable to each other.

In “Development as Accountability,” the nonprofit, international organization,  AccountAbility, has this to say about the current state of collaboration among governments, private corporations, nonprofits and nongovernmental organizations in fostering economic development, particularly in poorer countries around the world:

From Indonesia to Senegal to Bolivia, when public-private partnerships take over what have been traditionally public areas of service, like water and sanitation, they can blur the lines and channels for accountability.

The paper adds:

In some sectors, partnership has become a byword for inefficiency, or worse, a means of cheating intended beneficiaries. New methods are urgently needed to assess the accountability and effectiveness of partnerships.

Focusing elsewhere on the P-PP spectrum, Pamela Bloomfield writes in “The Challenging Business of Long-Term Public-Private Partnerships,” that:

In several cases reported by the author and her colleagues at an independent state oversight agency over the last decade, long-term public-private partnerships that were reported and promoted as low-risk, cost-saving initiatives have saddled taxpayers with high-risk, costly obligations for decades to come.

Bloomfield, whose paper won an award for the best paper by a practitioner published in  Public Administration Review in 2006, focuses on complex, long-term municipal contracts in the U.S. with private companies for services, construction, and in some cases financing. [By way of disclosure, Bloomfield, now with the Clarus Group, was my immediate boss at the Massachusetts Office of the Inspector General, where I worked as an analyst from 1998 to 2003.  I was involved in the OIG’s examinations of two of the cases cited in her paper.]

Both papers draw a distinction between what I would term the “stronger” and “weaker” players in P-PPs, and both note that the end result of many of these arrangements is that the interests of the weaker partners are overridden by those of the stronger. 

In the case of international economic development, it is often the poor themselves–the intended beneficiaries of development programs–whose real interests end up being ignored by the rich countries, corporations,  and investors running the show, according to AccountAbility.  In the municipal contracting cases, the weaker partner often appears to be the public partner–the municipality, for instance–which frequently lacks the contracting expertise of the private partner, and may not have the resources to adequately monitor and enforce the contract.

The AccountAbility paper puts the problem this way:

Accountability systems in [economic aid and] development [programs] tend to mirror the imbalance of power and resources of the stakeholders. It is unusual for donors or businesses to be effectively held to account by grassroots NGOs or poor communities. The result is underperforming development results and the potential for social and political unrest.

Bloomfield notes that one of the key results of the unequal relationship in long-term municipal contracts is that the financial risks of the “partnership” often end up largely being being borne by the public jurisdiction and consequently by taxpayers. 

For instance, a 20-year contract signed in 1999 by the Lynn (Massachusetts) Water and Sewer Commission with a private firm to design and build a new city sewer system, ultimately assigned the risks of sewer overflows and flooding rsulting from the contractor’s redesign work to the sewer commission rather than to the contractor.  Similarly, a 20-year contract signed in 1985 by 23 northeastern Massachusetts cities and towns with a private company offering to finance, build, and operate a solid waste facility “allocated most of the project’s considerable financial risks to the public…”  The towns in the North East Solid Waste Commitee, known as the NESWC consortium, ended up paying waste disposal fees that were more than twice the market rate in the region.  Both of these projects had initially been promoted by the private “partners” as unbeatable deals that would result in major savings for taxpayers and ratepayers.

The AccountAbility report describes a situation of economic imbalance involving energy supplies Russia, which has high rates of energy consumption and “no incentives for energy conservation.”  In the gas industry, in particular, there is “a lack of coordination of gas producers and distributors, from the private sector and State, at the national and regional levels.”  The only customers that have metering capacity are a handful of businesses.  Without adequate metering, consumers in the community end up paying for the rest, including the costs of lost resources due to leaks, the report notes.

Yet, there have been promising collaborations as well, including a “multi-stakeholder dialogue and negotiation” involving the government, businesses and NGOs on protecting the ecologically fragile Pantanal rainforest region in Brazil.  Bloomfield notes that there have been successful examples of long-term municipal contracts in this country.

Both AccountAbility and Bloomfield call in their papers for new accountability and transparency structures, including better oversight and monitoring of P-PPs.  AccountAbility recommends that investors and donors become involved in the governance of the partnerships.  NGOs and other “civil society organizations” must help in scruitinizing the arrangements as well, the report states.  One of the key recommendations is the adoption by the partners of a “mutually agreed scope of work,” followed by ongoing evaluations of effectiveness.

Bloomfield similarly suggests that sufficient resources be available to local governments “to manage, monitor, and enforce these contracts.”  She concludes with a call for a new public-private partnership, but this time one that would involve:

…a collaborative effort on the part of many public and private stakeholders: governments, academic institutions, independent think tanks, public interest groups, and other individuals and organizations committed to promoting and protecting the public interest.

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