The best of both worlds: how oneTRANSPORT improves on established models of Public-Private Partnership
With Public Private Partnerships now more widespread – and controversial – than ever, we look at the history of PPPs in the UK, and show how oneTRANSPORT improves on established models
The history of PPP in the UK is dominated by the Private Finance Initiative. Introduced in 1992, PFI marked the first use of legislation designed to actively encourage public and private sector collaboration. It sought to address concerns about high levels of public debt, and the perceived poor record of public sector infrastructure procurement.
In PFI, the private sector finances and builds the infrastructure for the public sector client, who in return agrees to pay the private companies to use the infrastructure for the lifespan of the contract, generally 25-30 years. While the model has stimulated increased investment, and decreased the number of projects delivered over budget or late compared to traditional procurement methods, it has been discredited for two key reasons.
First, the model has loaded public bodies with vast long-term debt liability, while enabling their private partners to reap windfall gains from refinancing PFI contracts. Second, it has effectively excluded the public sector from participating in the design and construction of infrastructure, by transforming public organisations from active owner-operators of assets into passive clients of the private sector. This latter reveals the unequal collaborative standard within PFI, in its implicit assumption that private companies are overwhelmingly the creators of value. These issues have ultimately discouraged genuine partnership working.
The example of oneTRANSPORT represents a significant departure from the PFI model. The two year, grant-funded project aims to deliver a single, standardised platform into which transport authorities can publish their multi-modal data assets, thereby creating a single marketplace for these authorities to license use of their data to one another, and third parties.
In oneTRANSPORT, the third-party funding provider, Innovate UK, is crucial. Because Innovate UK awards funding to the consortium on condition that benefits for all partner organisations and wider society are identified, it ensures that the interests of public and private bodies are better aligned. Moreover, it enforces a single collaborative standard, and this structural equality encourages a more holistic appreciation of the strengths and weaknesses of each organisation in the consortium. This is a fundamental departure from PFI, in which the private sector is understood to be the primary creator of value.
The model therefore empowers public bodies to actively participate in project delivery, as the entire consortium recognises the value these organisations contribute. Accordingly, public partners become more open to implementing private sector process change through the project because of the incentives identified for them to do so.
The Conservative-Liberal Democrat coalition government recognised the shortcomings of PFI and in 2012 introduced a reformed model: PF2. The most important of these reforms were the introduction of public sector equity, and a centralised procurement body for future PPP projects.
Recognisable in both reforms is an attempt to replicate the structural conditions of oneTRANSPORT in the context of long-term infrastructure projects associated with PFI. Public sector equity increases the size of the minority equity stake public bodies will take in PF2 contracts, which serves to better align public and private interests, and encourages greater active collaboration between public and private partners.
In addition, the centralised procurement body performs the role of Innovate UK as a detached third party which acts to protect the interests of all consortium partners, and maintain an equal collaborative standard. As in oneTRANSPORT, this equality shifts the perspective away from correcting public sector failings with private commercial discipline, as in PFI, towards a more rounded appreciation of each partner’s strengths and shortcomings.
It is these conditions which foster authentic public-private collaboration. Only when both sectors recognise the benefits of partnership will they be prepared to work together to achieve a common goal.
The full white paper can be found at oneTRANSPORT – Best of Both Worlds.