Public-private partnership
Popular phrase, popular prospects, but what potential pitfalls? And more pragmatically:
What the heck is it?
Experience has proven, more times than necessary, that neither the pure private sector nor the pure public sector reliably produces sustainable affordable housing:
- The private sector produces slums by simple economic rationality.
- The public sector produces slums — more slowly, but often at larger scale — because the law of economic gravity.
Since affordable housing does not exist in nature — it requires government financial resources to close the cost-value gap — the only remaining avenue lies in the tortuous (but not torturous!) road of public-private partnership:
“When you have eliminated the infeasible, whatever remains, however inelegant, must be the choice.”
– Sherlock Holmes, affordable housing detective
So what is it?
Public-private partnership is a two-way agreement (government, private partner) that establishes a three-way bargain (government, private partner, customer household).
This is not contracting. The public sector is not procuring one widget (or a hundred!), it is entering into a long-term relationship.
We’re not trying to punch ‘em out on an assembly line ….
Let’s be specific as to the differences:
|
Contracting model |
Partnership model |
|
Public sector specifies form of houses: configuration, construction, amenities. |
Public sector invites proposals of competing visions for houses: |
|
Public sector issues Request For Proposals (RFP) with extensive process-oriented specifications for construction materials. |
Public sector issues Request For Qualifications (RFQ) to invite offerors to propose the form of partnership entity. |
|
At completion, public sector owns the houses. |
At completion, private sector owns the houses subject to government regulation/ requirements. |
|
Private sector is regulation by mandates and prohibition. |
Private sector is regulated by financial incentives (positive and negative). |
- In a contracting model, the public sector thinks of itself as the owner seeking a defined service or product.
- In a partnership model, the public sector thinks of itself as a non-controlling partner who has leashed an energetic but not very wise and very shortsighted beast to pursue joint objectives.
“We’re gonna make a buck! We’re gonna make a buck!”
So the government’s goal, then, is not the initial bargain but rather a structured set of incentives that work over time – the reins, if you will.
It turns out that it is not in government’s nature to loosen the leash; government is forever twitching the reins and tweaking the rules. This confuses and frustrates the dogs. Far better is to specify outcomes and rewards, then get out of the way.
“Hey, we haven’t published the regs yet!”
Yes, public-private partnership is complex.. Yes, it requires careful design and heavy brain damage up front. Yes, it’s fraught with it. Indeed, everything’s wrong with it … except that it does the job better than anything else.
‘Democracy is the worst possible form of government … except for every other form that has been tried.’ – Winston Churchill.
“Take away my cigar and I get grumpy”
