Public-Private Partnerships as Collaborative Projects: Testing the Theory on Cases from EU and Russia

ABSTRACT

How do public-private partnerships (PPPs) differ from traditional public procurement and what role should governments play in them? This article views PPPs as collaborative projects with imperfect information between parties. Typical public procurement contracts tackle asymmetric information problems yet limit feasibility of projects: some are not profitable enough to ensure private party participation. Partnership improves feasibility; this justifies PPPs as a form of public good provision and demonstrates how they differ from procurement. Four UK and Russian cases of PPP projects are analyzed within the above framework, focusing on types of contracts, contributions of both partners, and specific partnership elements.

KEYWORDS:

• Public-private partnerships
• public finance
• contracting

Notes

¹ Examples include the renovation of the Ministry of Finance in The Hague, new buildings for Penal Institution Zaanstad, for Soesterberg military museum, for the Innovation Management Group and Groningen Tax and Customs Administration, and for the Supreme Court of The Netherlands.

² As the operator reports, “the owner of the highway, the Skanska ID-led special purpose company Tieyhtiö Nelostie Oy, is paid by the authorities depending partly on user numbers” - http://group.skanska.com/projects/57385/E75-Highway.

³ http://www.pppi.ru/projects.

⁴ PPP Development Center, http://pppcenter.ru/en/.

⁵ Sensitivity describes by how much the generated social value changes in response to a variation in the input of either party. In microeconomics, a traditional measure of sensitivity would be factor elasticity of the output.

⁶ See, e.g. the BBC report “King’s Lynn incinerator: £500m scheme set to be scrapped” of 31 March 2014: http://www.bbc.co.uk/news/uk-england-norfolk-26820542.

⁷ This emphasises, in particular, that mistrust between the parties, which makes them believe that there is a need to monitor actions of each other, leads to a suboptimal outcome, as in an equilibrium less resources will be provided in total, yielding a lower value of the project. For this reason, the benefits from a partnership in the framework employed in this article would only become larger, as it is assumed that improved communication in a partnership contributes to developing more trust between the partners.

⁸ Sources used: [1] Kane A. (2014) “Great Blakenham incinerator comes online”, Resource, 4 December 2014, available online at http://resource.co/article/great-blakenham-incinerator-comes-online-7008; [2] Suffolk Energy From Waste website, http://www.suffolkefw.co.uk/the-facility/facts-and-figures; [3] Suffolk County Council (2010) Final Business Case: Application for the private finance initiative credits, Department for Environment, Food and Rural Affairs Waste Infrastructure Delivery Programme, Suffolk Council Cabinet Meeting of 7 September 2010, Appendix A, available at http://committeeminutes.suffolkcc.gov.uk; [4] Suffolk County Council (2010) “Energy from waste project”, Scutiny committee meeting of 18 September 2013, Evidence Set 1, available at http://committeeminutes.suffolkcc.gov.uk; [5] SITA (2012) “Experience with EfW project procurement in UK”, available at http://www.ir-foundation.com/wp-content/uploads/2013/01/B2-Frederic-Aguesse.pdf.

⁹ Sources used: [1] “Musornye Voiny: epizod vtoroi” (“Waste wars: episode 2“), Krasnokamskaya zvezda, 29/06/2011, available online: http://media-office.ru/?go=353494&pass=0d6a1671b8ea281e5a5c42263bbb6610; [2] Bumatika official webpage http://new.bumatika.ru; [3] “V Permi zarabotal kompleks po avtomaticheskomu razdeleniu musora” (“Waste separation facility launched in Perm,” e-newspaper NeSekretno, 15/11/2013; available online http://www.nesekretno.ru/social/18155/v_permi_zarabotal_kompleks_po_avtomaticeskomu_razdeleniu_mus; [4] Glushkov A. (2013) “Est takaya professia – musor sortirovat” (“The profession to sort waste”), e-newspaper ProPerm.ru, 06/11/2013, available online: http://properm.ru/news/society/69365/ ; [5] “Bumatika: kompleksnyi podhod v ekologii” (“Bumatika: A complex approach in ecology”, Business Class, 27/06/2011, available online: http://vm1547.vps.agava.net/?go=2281733&pass=0cd5668fe7a83700c3f42c350872b367; [6] “Innovatsionnaya Bumatika” (“Innovative Bumatika”, Business Class, 10/10/201, available online: http://www.business-class.su/news/2010/10/11/76872; [7] Romanova A. (2012) «Musornyi Veter” (“Wind of waste”), Krasnokamskaia Zvezda, available online: http://www.raionka.perm.ru/krasnokamskaya-zvezda/?page=news&id=5214 ; [8] Bykova A. (2014) «Musornoe delo» («The Waste Business»), Zvezda Newspaper, 17/06/2014, available online: http://zwezda.perm.ru/newspaper/?pub=13635; [9] Shishkina O. (2014) “Nedohodnye othody” (“Unprofitable waste”), Metragi, 10(43), 52–55; [10] “Pusk mosorosortirovochnogo zavoda v Kransokamske otkladyvaetsia” (“The launch of the waste sorting facility in Kranokamsk delayed”, Business Class, 19/06/2008, available online: http://www.business-class.su/news/2008/06/19/12329; [11] Efremova (2011) “Prokurature ne udalos osporit…” (“The prosecutor’s office failed to challenge”), Kommersant-Prikamie, 11/01/2011, available online: http://www.kommersant.ru/doc/1565579; [12] Zusman E. (2013) “Sudebnaya Praktika po koncessiam v regionah” (“The court practice on concessions in the regions”), presentation, VEGAS-LEX, Moscow, available online http://www.gosbook.ru/node/84273; [13] Suhanov V, and M. Strugov (2015) «Moskva poshla v othod» («Moscow is going to waste»), Kommersant-Prikamie, 07/03/2015, available online: http://www.kommersant.ru/doc/2682802.

¹⁰ Krai is a large administrative territory and a constituent entity of the Russian Federation.

¹¹ Sources used: [1] Siemens (2006) News release of 19 December 2006, available at http://www.siemens.co.uk/traffic/pool/documents/press_releases/2006/siemens_essex_contract_91206.pdf; [2] ECC (2006) “Summary Of Decisions Taken At The Meeting Of The Cabinet Held At County Hall, Chelmsford On 24 October 2006”, Essex County Council; [3] Traffic Technology Today (2012) “SA2000 JV achieves 100% success”, published July 25, 2012, available at http://www.traffictechnologytoday.com/news.php?NewsID=41380; [4] Siemens (2010) News release of 21 April 2010, available at http://www.siemens.co.uk/traffic/pool/documents/press_releases/2010/final_retrofit_programme_in_essex.pdf; [5] Burr R., L. Saville (2008) “Using ITS to deliver the network management duty of the traffic management act and improve journey time reliability for road users”, paper presented at the ITS World Congress, November 2008, New York, available at http://www.atkinsglobal.com/~/media/Files/A/Atkins-Global/Attachments/sectors/roads/library-docs/technical-journal-2/its-and-the-traffic-management-act.pdf; [7] ECC (2004) “Contract 2000 Review: Report by Cabinet Member for Highways and Transportation”, 27 January 2004; [8] ECC (2006) “Traffic Control and Information Systems Contract: Report to the Highways and Transportation Policy Development Group”, 16 March 2006.

¹² Sources used: [1] Tender, project and selection documentation provided of the Regional Ministry for Transportation and Roads, http://transport.tularegion.ru/transp/konkurs/skd/; [2] Information agency Tula News, http://www.newstula.ru/fullnews_112661.html; Regional Ministry for Transportation and Roads of Tula Region, Press Release of 02/12/2015 . http://www.admportal.tula.ru/presscenter/press-release/press-release_22854.html; [4] Report of the Minister of Transportation and Roads of Tula Region, Alexander Kamzolov, to the meeting of the regional government on 07/12/2015, http://tulasmi.ru/news/216966.

Additional information

Funding

This work has been funded by the Russian Academic Excellence Project “5-100.”