The Impact of Private Public Partnership in the US - Essay Example

This essay talks about the impact of private-public partnership. A P3 or public-private partnership is a contractoften a long-term dealbetween a governmental body and a private entity, most often a corporation. The goal of the organization is to provide some public benefit, either an asset or a service (FASO, 2016). A vital component of these agreements is that the set apart party must take on a significant portion of the risk because the contractually specified remunerationhow much the private party receives for its participationtypically depends on performance. Public Private Partnership can provide private business interests, but there are also a lot of risks, this article will study whether these affect the government and business. So, let's talk about this issue, advantages and disadvantages in two ways to discuss the impact of the Public Private Partnership, and how this use in our daily life.

According to some research carried out, it is evident that public-private partnerships have existed for a very long time. Additionally, the past few years have witnessed an increase of governments using the above mix to carry out some different tasks. The definition of public-private partnership as the arrangement covers many types of long-term contracts that need sharing of risks, funding arrangements and transparency to both the public and the government inspectorate bodies (Eggers, 2004). Public-private partnerships have a particular connection with the concepts of privatization and also contracts made out of the government service. These type of businesses also include some groups of possible arrangements the most used being the long-term infrastructure contracts. Many countries use this collaboration, and the only difference comes regarding the agreement made between both entities.

The most witnessed types of public-private relationships occur when it comes to issues related to infrastructure. These partnerships get applied in different levels that include using them as a specific project or activity, the application as a type of project delivery, application due to government policies among others. They also get used as tools of the government as well as a broader cultural phenomenon. A different implementation of these partnerships depends on the aspects of the public-private events.

The main aim of forming public-private partnerships is to help in sharing the risk that comes with a project and also enable the development of the sustainable and long-term relationship between the public sector and the private sector. As a result, most of the financing gets done by the private sector which also enjoys most of the profits and returns of the project. Despite that, this phenomenon faces a lot of controversies from various areas. The primary cause of such crisis is the lack of mutual understanding between partners thus making it hard to evaluate the success of the partnership (Sharma & Bindal, 2014). Using past public-private alliances for success evaluation is also hard as most of them got marred by difficulties and criticism at a specified period. It is essential to understand that a public-private relationship encompasses the process of using a private entity to finance, construct and manage a detailed project after an agreement gets made by the government to pay the body. Payment comes in the form of money from the government and also gets obtained indirectly from the intended users of the project. Public-private partnerships are directly responsible for many activities in a country of specified region and as a result, they at times evolve and become monopolies due to the control of a large public service provision sector.

It is essential to understand how these type of partnership functions. Often, PPPs involve the formation of a contract between the public sector authority and a private entity specialized in the area. The individual body must ensure the provision of the federal services in question or the control of the project and carries the burden of risks that come with the financial aspect, the technicalities and also the operations related to the project. The government gets involved in the servicing of the PPP in some ways (Rosenau, 2000). For example, if the project consists of the provision of public goods such as infrastructure, the government gets involved by providing a capital subsidy that comes as a grant, and it is used to ensure that the project is economically viable. In other cases, the government shows its support by providing tax breaks, revenue subsidies and also guaranteeing set annual revenues for a specified period.

Various drivers lead to the formation of public-private partnerships. The most common driver explains the reason of the structure of PPPs as an aim of enabling the public sector in a given country to harness the expertise and efficiencies of the private sector seen in the way they deliver specific services and facilities. Those are services traditionally meant to be offered by the public sector. Another driver of PPPs it structuring and forming the contract so that the public sector body can make the specific capital investment without incurring any debts. We can thus conclude that to make PPPs functional; the private sector body comes up with a unique organization called the unique purpose vehicle whose main aim is to develop, build, operate and provide maintenance of the project for the period specified in the contract. The primary purpose of the particular purpose vehicle is to sign the agreement with the government and also the subcontractors such as building contractors, equity investors, and maintenance companies.

The rise of public-private partnerships came after it became clear that the standard models of public procurement were not working. That is because they led to the accumulation of public debts especially during the macroeconomic dislocations that occurred in the 1970s. Governments sought the help of the private sector mostly in infrastructure developments, and that led to the encouragement of mutual operations with the private sector. The primary aim of this incentives was to help deal with accounting fallacies as public accounts did not have set parameters for distinguishing between capital and recurrent expenditures. The most prominent controversy that affected public-private partnerships is the issue of the private sector obtaining a higher rate of returns as compared to the governments bond rate even though the public sector shouldered most of the risks. That led to the development of various formal procedures for assessing these PPPs. Those methods put more focus on obtaining the value of the money invested rather than in the reduction of accumulated debts. They provided a framework that depended on the appropriate allocation of the risk involved in the project to achieve the value for money. Various models are in use by different countries with each having its parameters for ensuring the attainment of value for money. Other problems that the government needs to address when it comes to public-private partnerships is the issue of corruption and the conflict of interests which result in costs of opportunism instead of expenses related to the project functions.

In an effort of creating a better understanding of public-private partnerships, it is essential first to review different sectors that have foreseen such arrangements. Such include the privatization of water companies, product development partnerships, healthcare provision partnerships, and in other cases, the decentralization of government-provided services such as education among a few others. Public-private partnerships have many impacts on different sectors of the country. For example, when a nation utilizes this PPPs for some time, it has some effects on the economic growth in the country and also globally. That makes it very hard to come with a complete evaluation of public-private partnerships on their impact on the overall economic growth. Most likely, research shows that the entity cooperation with the government leads to the increase in the net investment of the state in a specified industry thus leading to more significant project growth in the economic sector.

What is uncertain in this type of evaluation is whether the cash would have had more value if had been used somewhere else instead of the project. I other words, it is okay to conclude that the impact of the public-private partnerships hugely depends on the costs of the specific opportunity involved. Another thing that a person needs to understand is that the essence of formation of the public-private partnerships is to help in sharing resources when it comes to labor, financing, capital provision and lastly management of the project. Thus what gets shared is the skills that each contributor displays, and that gets utilized in the delivery of services to the general public population of the country.

To explain this issue further, many economic scholars describe public-private partnerships as the natural extension of the mixed financial systems. In the current world, the governments are slowly coming to terms with their inefficiency and thus devising various strategies to deal with it. From some studies, it is clear that this administration also undergoes many problems when it comes to budgeting and financing during the execution of the initiative. The government thus employs the services of a more efficient private provider of goods and services to aid the delivering of the above service to the public thus serving its original agenda in one way or another. Another concept encompasses this type of partnership is the relation therein. It is evident that public-private alliances sometimes just exist to act an aid of transition between a public service and the privatized service. That creates a balance in the sector thus letting the economy remain viable and not infested with monopolistic companies. The concept, therefore, gets referred as corporatization, and it involves the ease of transformations and shifts from the public to private service delivery due to the gradual incorporation of some market decisions.

The number of public-private partnerships is continuously growing as dated from the year 1970. That is due to the substantial public praise the projects receive from the public and the citizens as they gradually accept and benefit from the services getting offered. Research by two different experts in the field yielded results that indicate the way federal agencies use the non-profit PPPs that obtain funds from the government to act as a tool for asking for more money for the projects. When it comes to economic growth, one thing that a person needs to understand is what drives this kind of growth in a company (Patrinos Osorio & Guaqueta, 2009). The primary drivers of economic growth in an individual country are the investments carried out and also the increase in the production output of the company. That makes it possible for the individual workers to ask for a higher value as the returns for their labor and thus achieve better standards of living. From that, the central question that comes to mind is whether public-private partnerships encourage the efficient use of resources in such a way that it can cause the shift in the marginal output of the country.

PPPs have undergone great criticism after getting related to politics. Many claims that PPPs are just but politically driven ends done with the aim of pleasing a person and as a form of corruption. That leads to the conclusion that the use of public-private partnerships to shift capital and labor from market-driven ends to politically driven ones have a significant effect on the growth of the economy. Those who disagree to the above statement propose that PPPs have a considera...