We spotted this article in The Canadian Taxpayers Federation magazine and felt that Sara's observations would be of considerable interest to those project management people who are involved in any way in the major projects industry. If Sara's observations are correct, Public-Private Partnerships, or "P3s" are not only a means for raising capital for investment, but also for bringing much-needed financial discipline to the business of public infrastructure design and construction. To underscore this point, the following table of projects undertaken by various levels of government in Canada, Figure 1, provides interesting evidence.
Figure 1: Examples of budget overruns for large construction projects in Canada
Of course, the concept of P3s only works if the private sector has an opportunity to recoup its investment plus a reasonable return on that investment, given the risk involved. That means that the project need or opportunity must be one that the public, i.e. the "customers", are willing to pay for on a pay-for-service basis. It is difficult to convince the public to pay for something that they normally expect to get for "free" through their taxes, such as road or highway networks. To pay "over the top" they need to see a clear added benefit, such as shorter journey time and/or reduced congestion.
There is also the public's perception of the "terrible specter" of someone making an "obscene profit" out of a "public service". It is true that profit is involved, but anyone in construction knows that the risks involved in any construction undertaking, especially one of any size involving property and the environment, is considerable. It is orders of magnitude different from, say, interest on a bank savings account. And people complain how low those are!
It is also true that the legal agreement between the parties must be very carefully crafted for the arrangement to work. This is especially the case considering the long term of such agreements and how they can be seriously impacted by inflation of the value or cost of money. However, considerable experience is now being built up in crafting such agreements.
So, on balance, we think we would rather settle for paying the extra profit factor over the long term for a major infrastructure works, than be held captive to bureaucrats. After all, such people are only spending money that is not their own, and with a tendency to a short term view.