Imperfect partners

  • 2003-12-11
Reading your report "Balts study merits of public-private partnerships" (TBT #384) leaves me with the clear impression that only the "good news" about PPP was presented at the seminars sponsored by UK Trade and Investment.

The benefits, if any, of PPP to taxpayers and facilities users are far from clear, and the topic is highly controversial here in the U.K. There may be some PPP projects, such as the Channel Tunnel Rail Link, which will be successful (it is not yet completed), but there are certainly some which have already been disastrous. The statement that transferring construction to private management cracks down on unwieldy contractors who tend to inflate budgets implies that PPP tenders are lower than for other forms of contract. The fact is that contractors bid for PPP work because they can thereby get a better profit margin, and the time-consuming PPP bidding process is in itself expensive. So this is not the way to obtain a low initial (as tendered) price. Possibly there is better management of project execution since design, procurement and construction are by the same contractor, and therefore cost escalation should be minimised.
The reason PPP is so favored by the U.K. Treasury is that the chancellor of the exchequer can remove certain expenditures from the government's budget. This does not necessarily mean that the public get a better bargain.
I hope that the attendees at these pro-PPP seminars realize that they were being given a sales pitch. Prior to adopting the PPP approach they should research the subject for themselves by talking not just to consultants and contractors seeking work, but also to clients who have used PPP and have seen both the good and the bad sides.

Aleksas Vilcinskas
London, U.K.


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