Defining Public Private Partnership Social Policy

Add: 23-08-2017, 17:35   /   Views: 420

The term public private partnership is a relationships between public and private sectors in the provision of infrastructure and other services. Other terms used for this type of activity include private sector participation (PSP) and privatization.

Public private partnership is a leasing arrangement, a private company or a group of companies undertake to finance and build an asset, and in some cases run the assets and provide a service associated with it, in exchange of annual fee under a contractual agreement. These arrangements are applied to variety of assets including construction of roads, building schools, hospitals and also providing these services to the public. At the end of the contractual period these assets are transformed to the government.

A strong public private partnership allocates and transfer risk between public and private entities. The public partners in a public private partnership are government agencies, including ministries, departments, municipalities, or state-owned enterprises. The private partners may be local or international and business investors having technical and financial expertise. Increasingly, public private partnership may also include Nongovernment organizations (NGOs) and community based organizations (CBOs) who represent stakeholders directly affected by the project.

There are three phases of public private partnership.

  • The Financing arrangement
  • The construction phase
  • The provision of service by keeping asset

The three elements of ppp deals solved three problems for the government. The Financing arrangement postponed payment to future years. The construction element based on a specification and performance contract, removed the problem of the management of capital projects from the public sector. The ongoing contracts transfer the problem of running the asset to the company that provided them.

The private finance initiative was introduced in the Autumn statement in1992when Norman Lamont was chancellor of the exchequer. Essentially the idea was that instead of borrowing money for capital expenditure the government must contract with private sector firm to provide the service associated with a capital asset to pay a fee for them. The advantage for the government is that they would not have to borrow the money and the capital spending is not considered as public expenditure thus keeping borrowing and spending low in the year in which the deal is enacted.


There are different forms of public private partnership that are widely used in a context to establish contracts. Following are the models of public private partnership.


Service contract is an arrangement between public and private sector to carry out short term operational requirements. It is a form of public private partnership in which private party operates, procure and maintain an asset, while the management and investment responsibility remain with the government or the public sector that bears the financial risk. This contract is particularly for 1-3 years and public authority assign some activities to the private sector to operate. Under service contract the private partner receive fee for performing service from the government may be unit cost or one time fee, therefore he can increase profit margin by reducing operating cost.


Service contract provides usually a low risk option for the private partner, and the service to be performed is clearly defined in the contract. Service contract are for short term and has substantial impact on the operation and efficiency of the system. It offers low barriers to entry that results in increased competition.


If the objective of the contract is to attract capital investment then service contract is not suitable, this contract may increase efficiency but the contractor is not bound and under obligation to provide financing. The efficiency and effectiveness of the contractor may be compromised if other financing sources like government and donors do not materialize.


It is a form of contract in which some or all of the operations and management of the sector is handed over to the private sector, actually the ultimate provision of service remains with public sector but day to day operations and management authority is transferred to the private sector. the private partner in most cases provide working capital but not provide further investment. The public sector is responsible for investment and discrete functions and performance to be achieved by the private sector is predetermined in the contract. The examples include utility services,port authorities and hospital management etc.


The major advantage of the contract is that efficiency can be achieved by involving private sector without transferring the ownership of asset. This contract is of low cost and requires fewer staff from private sector to perform an obligation like utility services.


The main risk involved in the management contract is that I may not provide extensive authority over labor force which is deeply required in the positive change. The difference between the service and management is tricky one.


Under leasing contract the private partner provide the service at his or her own risk and is responsible for providing service under obligation. The asset is retained with the private owner and at the end of the contractual period the asset is handed over to the original owner. The duration of the contract is typically for 10-20 years. The responsibility of service provision is transferred from public operator to the private operator and is responsible for the financial risk of operation and maintenance.


The profit of the private operator mainly depends upon the sale and cost of utility. This contract provide an incentive for the private partner to achieve high level of efficiency an sale of utility. The main advantage for the public sector is that the risk of management is transferred to the private owner. The private partner does not provide investment but pay fee for the use of asset.


As the contract allows to generate revenue from customer payments here the question of tariff level becomes sensitive. As the capital investment in the asset is the responsibility of the government so no private investment is mobilized.


It is a contract in which all the risk of operation, management, maintenance and investment even the re structuring is transferred to the private operator. The performance standards are set by public partners and ensure that the private operator should meet these standards. The public sector beside providing service play the role by setting prices as well. The concessionaire to generate revenue collect tariff directly from the system users and the criteria and rules of the game are set by the government. The private partner is responsible for the capital investment in the asset to structure and upgrade the asset, sometimes government also provide help in the investment of the asset to provide help to the private operator. Concession contracts are typically for 25-30 years that provides a long time period for the operator to recover the capital invested.


For the public partner or government the concession is important in a sense that provide assistance to attract private partners to provide fund for the construction of building or roads in the existing facilities. Main advantage to the private operator is that he can achieve high profit against the investment by achieving efficiency.


The main drawback is to define the activities and responsibilities of the private partner in the contract. As the contracts are long term it creates difficulty in bidding process. There is also possibility that the private owner may invest in the asset that have payback lies within the contractual period. Political hurdles may also affect the contract due to its long term nature. As the concession require huge investment there are limited number of competitors and operators for major infrastructure.


Pakistan is facing serious problems in the health sector from the birth. The developing countries are facing severe health problems due to poor performance of the government. Since 1947 three main forces the military, the politicians and the civil service are dominating the state. There remain the war for power and attaining supremacy. Donors have also significant role in the establishment and running of different sectors. After the war on terror Pakistan proved to b more important for the rest of the states and donors. Outside resources used for the country's health sector have reached to 3 of the total expenditures in the health sector.

Government is responsible for the provision of health care facilities because individual market forces can't provide these services alone on an equitable manner. As the constitutions are framed by the government therefore they are bound by the acts to provide these services equally to all. Moreover the governments have to take certain measures to control diseases and health care activities in the state. Establishment of hospitals, provision of staff and medicines is the prime responsibility of the government of the state.

Poor government decisions and high degree of corruption, inefficiency and poor control over the resources has lead to severe epidemic condition of health sector. For many years over75 percent of health services are provided by private sectors. The states delivery of services is in crises in Pakistan, there coverage is in adequate and quality is not according to the standard. An overview of the country's performance shows that as more than Rs.160 billion have been invested in the social sector through different programmes but the condition still ranks below the nations of the world.


Inappropriate health activities in the country has increased the problem for the population .pharmaceuticals companies working in the state are illegal.40 to 50 percent of medicines produced in the state are forged. The weak government regulations and poor control over the pharmaceutical companies has lead to many irregularities. The ultimate affect of these irregularities proved in the form of forged medicines and the death of the public.


Corruption remains the greatest chellange for the governance and there is a common perception that the corruption is at peak in the health sector. The most prominent example of corruption in Pakistan is noted through absenteeism of health personnel and doctors. A very large number of doctors are receiving salaries but they are not performing their duties in a right manner. They remain available in their private clinics but the government hospitals remain empty. The other form of corruption is through charging high fees from the patients, even medicine is supplied by the government, hospitals belong to government but they even charge fees as well. Corruption is also common when the contracts are given to the contractors for the purchase of equipment and medicines for the government hospitals. With the consent of high officials the contractors by low quality equipments and even expired and forged medicine for the hospital that lacks behind the useful life. The drugs and medicines are stolen from the store and sold in the private market resulting in a shortage of medicine in the public facilitation hospitals. The process of licensing pharmaceutics' is backed by bribe. In fact every sector and through the hierarchy almost every one is involved in one and another way in corruption.


Rules of society are very low in Pakistan .these problems are due to poor contract performance and poor judicial system and due to ill equipped performance agents. Pakistan has a very weak system to address medical negligence that ultimately affects consumers. There are no adequate policies available for the protection of poor patients. In the developed nations the patients can sue the doctors and medical practitioners in here negligence but in Pakistan people due to poor background and approach can't take even their right to be medicated. These in adequate laws have affects on the consumers.


Government is a symbol of appropriateness and is responsible for the formulation, implementation and evaluation of quality social and health programmes. The major problem in Pakistan remained the provision of poor quality of health management and services. The quality standard of government hospitals is very poor in Pakistan that encouraged the private sector to come forward and take the charge.70 percent of the users are not satisfied with the medicines and even the staff of the hospital. Project planning is the domain of the planning commission and the ministries are responsible to charter different programmes for the development of the health sector and the district governments have to undertake the directions of the provincial department and implement the plans.


An attempt was made for making reforms in the health care though a private initiative in a small town LODHRAN in the Punjab province, after realizing the fact that the government sponsored health care system can not fulfill the needs of the public and the experiment was made in 1999 to re engineer the process for primary health care (PHC). This reform was initiated in collaboration with a public sector NGO, National Rural Support Programme (NRSP) that run three BHU's on behalf of District Administration. This experiment was although on small basis but proved successful. However the success of the program compeled the provincial government to take and initiate the program as the Chief Ministers Initiative on Primary Health care (CMIPHC). District Rahim Yar Khan was chosen as a pilot district for the project, whose Nazim Mayor extended political as well as administrative support for the program. Terms of partnership was signed between the district government and PRSP for five years period on 15th April 2003. On signing the contract PRSP was given a complete financial as well as administrative authority of 104 BHU's in the district. The PRSP has to run these BHU's under the existing budget constraint. One doctor posted to each cluster. If he was supervising 3 BHU's then was paid Rs.30,000/ in case of supervising 2 BHU's he received Rs.24,000/ per month. This salary package was higher than that paid by the provincial government. The doctor was also allowed to receive Rs.100000/ loan to buy a vehicle for himself, and was allotted residential facility in the remote area where there was a problem of residence. The doctor was only responsible for the overall maintenance and record of BHU's under his/her supervision.

PRSP has addressed the problem of absenteeism of female medical officers in the rural areas successfully. Due to some social constraints females in the rural areas were hesitant to consult male doctors so the presence of female medical officer was essential to save mother and child. In the same way no female officer was willing to work in a remote area so many attractive packages were offered to them to resolve this problem. She was paid up to Rs.37000/ per month and can receive an interest free loan of Rs.150,000/ for the purchase of a car.

Although the Lodhran model was home grown model of health care due to its efficiency and significant impact it was implemented on a large scale to provide health care facilities to more than 25 million people.

  • This project reduced absenteeism up to negligible extant.
  • Efficient health care facilities were available on a large scale even in rural areas.
  • De centralization in management reduced the affect of corruption at the upper level.
  • BHU;s in the rural areas become functional that were closed due to absence of doctors.

As the project was again handed over to the district government and with in a year the BHU retained the old position and the results were disastrous.

This diagram shows the affect of ppp on health sector that how the number of visits went up in the hospitals when organized by PRSP and in the same way went down when handed over to the government.


It is evident that public private partnership is the essential way to cope with any poor working department or sector. However the government should take certain necessary steps to provide efficient health facilities to the public at their steps.


Private sectors move forward because of government in efficiency to run any sector properly, still in health care public private partnership is poorly developed. The government should encourage the role of donors and civil society to the health care. Private partnerships should be made to bring efficiency and transparency in the health care. Private firms should involve to run the system and to provide health care facilities to all sectors of the state and poor public on an equitable basis.


Corruption is a root cause of the problems of health care and the existing situation of the health sector. The whole sector is under the control of corrupt supervisors, there is a dire need to bring transparency and to set up a system through proper planning and implementation of process. Transparency can also be achieved through reforms in the health sector. Government may enforce reforms and may introduce private partner to take over the responsibility of maintaining and operating the health sector.


Efficiency can also be achieved through creating proper check and balance system in the health care, by supporting to the health committees and communities. Measures must be taken to develop community participation. Weak check and balance in any sector can affect the efficieny of that sector and contribute to the down fall more effectively.