Last month, In the Public Interest published an issue brief, New Guidance for Value for Money Analyses when Considering a Public-Private Partnership, that took a look at what factors governments can and should include when considering a Public-Private Partnership (P3) contract.

Earlier this month, the author of that report, Shar Habibi, In the Public Interest’s director of research and policy, was interviewed by Terry Gerton of the Federal News Network about the brief and what the new guidance means for agencies making decisions about large-scale public projects.

We share here some highlights from Terry and Shar’s discussion.

On the differences here between privatizing public assets and actually building a public- private partnership:

There are five major activities when we’re building a piece of public infrastructure, like a highway, a bridge, a water system: the design of the piece of infrastructure, the actual building of it, the financing of it, the operations, and the maintenance. 

Under a more conventional project delivery approach, those are mostly done by the public sector…. In a P3 model, a public-private partnership model exists on a spectrum. But there is more private involvement. And in some cases, all five of those functions…are done by a private entity or a consortium of private entities. And so you have a private entity that will design the piece of infrastructure. They will figure out how to finance it, including private financing. Private financing is typically involved in P3s. 

I think one of the cautions that we have is that when there is greater private control over a public infrastructure project, there are decisions that might be made that are not the same as when there’s public control. So this is public infrastructure, there’s a public purpose, a public mission, we want this piece of infrastructure to serve the public. Those types of decisions may be more easily made when there is public control over the asset. One concern that we have is that the considerations like private investors rate of return may be something that is more considered over that public mission of the infrastructure. So there is this loss of control when that happens.

How are decision-makers in government supposed to use the new guidance?

One of the first [provisions] is the guidance directs public agencies to establish delivery goals. So what are our goals in delivering this piece of infrastructure? So kind of looking a little outside that just financial lens, and they give some examples like maximizing the use of innovative approaches and technologies, preserving flexibility for future improvements, promoting economic wellbeing, creating high quality jobs. So these are all good things that kind of go beyond just the really dry dollars and cents of how much the project costs. 

The other thing that this guidance does is that it places an emphasis on what types of data are the best types to use. [The] guidance says agencies should use actual verifiable data, and when that’s not available, they need to provide a basis for any predictions or assumptions that are used. And so this is incredibly important. 

We have analyzed some value for money analyzes that have been done by various jurisdictions. And one of the things that we have found is that sometimes the data or the assumptions that are used are just kind of taken as fact…. And as we know in any model, it’s a little bit of a black box. And so the inputs that you put in, highly, highly determine what the output is. 

Find the full interview here.

You can find the ITPI report New Guidance for Value for Money Analyses when Considering a Public-Private Partnership on our website.