Public services: cutting costs or cutting corners?

Submitted by admin on January 1, 1970

PPPs in public service sectors have been highly controversial: while investment has been sorely needed into new infrastructure, there's reason to believe that the PPP price tag has simply been too high, and that the expected service levels haven't been delivered.

There has been “a sometimes uncritical, if not ideological presumption that private sector participation in the provision of public services can do no harm."

So far PPP projects in Europe for services such as hospitals, schools, and prisons are limited mainly to the UK, Spain and Hungary.

Water supply has been run through concession in certain countries such as France for many years, has been fully privatised in England and Wales, and has a high level of private sector participation in the Czech Republic, but the vast majority of water supplies in Europe are managed by the public sector.

Health, education and prison PPPs

Relatively little attention has been paid by PPP promoters as to whether this transfer of traditionally public-sector functions to the private sector will benefit the delivery of services.

In health and education PPPs, the private consortium usually designs, builds, and operates the non-medical services in the institution, whereas in prison PPPs the company may also operate the actual prison services as well.

In these kinds of PPPs it is extremely difficult to specify accurately the performance standards for the consortium as relatively non-measurable psychological factors such as the quality of human relations and the quality and atmosphere of the building itself can make a tremendous difference to the overall performance of the institution.

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Water and wastewater PPPs

A 2008 overview of studies comparing public and private operation of water supply globally found that private sector participation has not reduced costs, although this has been one of the main advantages cited in favour of private sector participation.

Water PPPs, unlike most others, are more about renovating and managing existing facilities than about building a visible new piece of infrastructure, although the contracts may also contain requirements for the water network to be extended in countries where some households are not connected to the water network.

Water PPPs have been among the most controversial globally, with well-publicised large-scale failures such as Cochabamba and La Paz in Bolivia, Buenos Aires in Argentina, and Grenoble in France.

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