Getting Public-Private Partnerships Right

There is no doubt that corporate social responsibility is rising up on the public sector policy agenda around the world. In the private sector, corporate social responsibility (CSR) programs are no longer an optional luxury, but are becoming an integral part of “good” corporate governance and strategy. There is also a growing recognition and acceptance that collaborative public-private partnerships (PPPs) can deliver mutually desired outcomes. Public-private partnerships pose challenges for companies, but those who persist can find their efforts rewarded.

Cross-sector partnerships -such as those between business and non-governmental organizations, or business and government -are an increasingly popular way for companies to contribute to society. But while businesses are committing even more effort and resources to community projects and encouraging volunteering among their staff, their corporate responsibility activity could have a much greater impact if it was better linked with public sector regeneration. However, making partnerships work can be difficult-establishing clear rules of engagement and building trust is often a problem.

Too often partnerships are more like sponsorship, with companies footing the bill for projects in which they are not closely involved.

Many public sector unions remain skeptical -and are particularly concerned about the extension of the private sector into new areas, like schools and hospitals, which have traditionally been publicly run. The majority of public works are still directly funded by government. In trying to bring the public and private sector together, the government hopes that the management skills and financial acumen of the business community will create better value for money for taxpayers. Business has been ascribed a key role in international efforts to alleviate poverty in developing countries, as emphasized during the recent “Earth Summit” in Johannesburg. Certainly, it is gearing up for a massive increase in private involvement in public services in the years ahead.

But, how to strike a good deal? What are the key factors in a successful PPP?

There are several, but the main priorities are having a clear understanding of your own objectives and those of the other parties, and a mutually acceptable agreement on the desired outcome of the project. There also needs to be a genuine desire and capability to collaborate.

The fundamental components of a successful collaboration are from the outset: a realistic understanding of each party’s capabilities, and a pragmatic commitment to provide the necessary resources to support the partnership. It’s also important to have a long-term view of the project, with realistic short-and medium-term goals to check and refine progress along the way. Partners have to be able to refer to each other openly, transparently, accountably and frequently, to deal with challenges as they arise.

The big question is: with so many potentially different agendas, how can you ensure a deal is balanced? If the partnership truly understands and believes in the common goal, it will be driven by the collective beneficial solutions and common agreement on the sharing of risks, rewards, strengths and value of the deal in order to satisfy each party’s specific objectives.

The legal aspects of PPP’s are no more complex than a single-sector deal. In any agreement, each party’s intentions must be clear so the principles of cross-sector agreements are no different from others. The complexity may arise if the parties’ intentions are not evident or well documented from the outset.

A piece of advice: it’s important to avoid using a fixed template, having a one-size-fits-all mentality. No two PPPs are the same; every partnership is like a fingerprint -unique in its own way. A CSR programme for a mining company will be very different from that of a retail company, for example.

A key benefit of involving stakeholders as partners, despite the added complication, is the development of mutual understanding. Partnership may also increase capacity building in communities, improve the abilities of local regulators, and raise expectations within companies. Certainly, engagement with the government is, of course, essential for improving competitiveness on all sides.