Public private partnerships based on social outcomes are the future of the public services procurement method, Michael Gerrard, deputy chief executive officer of Partnerships UK, a PPP support group, told delegates gathered at the California Infrastructure Summit.
In a PPP arrangement, a government authority contracts with a private sector partner to provide a service, such as building and maintaining a courthouse or some other public-use asset, in exchange for a payment that is conditional or meets certain performance standards.
In the future, those standards are likely to be based on social outcomes rather than how those outcomes are arrived at as government authorities focus less on micromanaging procurement processes and focus more on the social goods they are trying to accomplish, Gerrard said.
As an example, he said that a local municipality hoping to put a street lighting PPP to bid will be more likely to make the quality of the street lighting a performance standard rather than focusing on “micromanagement” issues such as the types of lights to be installed.
Gerrard said: “Outcome-based procurement is the new frontier . . . that is our direction of travel”, cautioning that it may be difficult getting companies to commit capital to projects based on “hard-to-pin-down” outcomes, such as “safe streets”. To be acceptable to investors, such outcomes will need to be readily measurable, he said.
A member of Partnerships UK since its formation in 2000, Gerrard cited outcome-based procurement as the latest phase of PPP and private finance initiatives, which were launched by the UK government in 1992.
The UK went through “pathfinder” projects that set the course for PPPs, followed by a second generation of projects throughout which procurement methods were standardised and best practices emerged, he said. The UK is in the third generation of PPPs that are governed by the UK Treasury and use lessons learned from the earlier projects.
The evolution, he said, was not always an easy process and gives the US the ability to learn from the UK experience as it crafts its own PPP framework.
“The US to me has a huge benefit and advantage coming late to this because with so much experience from colleagues overseas you don’t have to go through generation one, two or three . . . you can go straight to generation five,” he said.
“I am incredibly jealous of where you [the US] are,” he added.