Part 2. What Public–Private Partnerships Are and What They Are Not

What Public–Private Partnerships Are and What They Are Not

After years of underfinancing much-needed repairs and maintenance to America’s infrastructure—by as much as $2.2 trillion, according to some estimates—digging out of the current deficit will be costly. And with state and local governments facing tight budgets, it may be decades before the work will be affordable. The lack of resources for infrastructure improvement and maintenance extends beyond highways and affects a range of public capital investments, from levees to wastewater treatment and from transportation to schools. The dismal state of the nation’s current infrastructure could hamper future growth.

The ways that governments allocate new funding for infrastructure projects and the ways they build, operate, and maintain those projects has contributed to the problem. New spending often flows to less valuable new construction at the expense of funding maintenance on existing infrastructure.  Further hindering efficiency, the traditional process for building infrastructure decouples the initial investment—the actual building of a highway, for example—from the ongoing costs of maintaining that highway. As a result, the contractor building the highway often has little incentive to take steps to lower future operations and maintenance costs. Such inefficiencies likely contribute to falling rates of return on public capital investments. PPPs can be used for solid waste, transport (airports, bridges, ports, rail, roads, tunnels, and urban railways), tourism, and water.

The United States is a relative newcomer to PPPs. Public–private partnerships have existed worldwide at least since the time of the Roman Empire (e.g., the use of private tax and toll road collectors) and in the United States since its founding. During the Revolutionary War, the Continental Congress authorized the use of privateers to harass the British navy. Later, much of the West was developed through a variety of PPPs, including the cross-continental railway. The production of transportation infrastructure often has been undertaken with PPPs, from the development of private toll roads and canals during the nation’s early history up to the recent Dulles Greenway—a privately financed, built, and operated toll road in northern Virginia.

Even though there is an old nineteenth-century tradition of privately provided public infrastructure and even of private tolled roads and bridges,  the United States still depends almost exclusively on the government for its public transport infrastructure (with the important exception of railroads).The two-decade trend toward PPPs that has revitalized the ways that many countries provide infrastructure has gained only little traction  in the United States. Whereas the United Kingdom financed $50 billion in transportation infrastructure via PPPs between 1990 and 2006, the United States, an economy more than six times as large as that of the United Kingdom, financed only approximately $10 billion during the same period.

Even with their ubiquity, there remains some ambiguity as to what exactly constitutes a PPP. . . For future articles . . . we shall focus on a . . . form of PPP that involves a greater role by the private sector in decision making and assumption of risk in the joint venture.

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Public–Private Partnerships: Public Accountability

Public–private partnerships (PPPs or P3) are growing in popularity as a governing model for delivery of public goods and services. In recent years, the state of California for instance has partnered with the private sector to finance, design, construct, operate, and maintain two state infrastructure projects—the Presidio Parkway transportation project in San Francisco and the new courthouse in Long Beach. Both the California Department of Transportation (Caltrans) and the Administrative Office of the Courts (AOC) entered into P3s for these projects in order to achieve benefits that they might not have obtained under a more traditional procurement approach (such as design-bid-build).  PPPS potential benefits include greater price and schedule certainty and the transfer of various project risks to a private partner.

PPPs have existed since the Roman Empire, but their expansion into traditional public projects today raises serious questions about public accountability. In a series of articles we plan on examining public accountability and its application to government and private firms involved in PPPs.

Part One-The Model:

Public–private partnerships (PPPs) increasingly have become the default solution to government problems and needs, most recently for infrastructure, and they are embraced by a wide range of constituencies, across political parties, and throughout the world. This trend may accelerate as governments experience fiscal deficits and look for alternative ways to finance and deliver government services. The rationale for creating such arrangements includes both ideological and pragmatic perspectives.

Ideologically, proponents argue that the private sector is superior to the public sector in producing and delivering many goods and services.

Pragmatically, government leaders see PPPs as a way of bringing in the special technical expertise, funding, innovation, or management know-how from the private sector to address complex public policy problems. The expanding domain of goods and services provided by PPPs includes private toll roads; schools, hospitals, security services, wastewater treatment, and emergency response.

There are many challenging technical and structural aspects to creating successful PPPs that have been addressed by other authors (see, e.g., Grimsey and Lewis 2004; Hodge and Greve 2005; Yescombe 2007). However, with the increased use of PPPs, the issue of public accountability has become one of the more important of policy questions raised (see, e.g., Guttman 2000; Sclar 2000). The purpose of upcoming articles is to provide a framework to assist public managers in effectively exercising accountability with PPPs. We will begin with a discussion of the nature of PPPs and the traditional concept of public accountability. Second, we focus on the unique characteristics of inter-organizational relationships that are pertinent to the exercise of accountability in PPPs. Finally, we shall offer a framework to analyze PPP accountability issues along several important dimensions that shape the relationships forged in public–private partnerships.

Next Time: What Public–Private Partnerships Are and What They Are Not

 

This week in Congress.

The Senate will consider resolutions of disapproval under the Congressional Review Act (CRA) and confirmation of the president’s appointees to federal agencies. The House will be taking up litigation reform legislation and appropriations legislation to fund the Defense Department through the remainder of fiscal year 2017. The highest profile activity in Congress this week, though, is expected to take place in the House which plans to mark up the legislation to begin to repeal and replace the Affordable Care Act.

The Senate will return on Monday afternoon, when votes are expected on two resolutions of disapproval of federal regulations issued in the final months of the Obama administration under the CRA. The first vote will be on H.J. Res. 37 to disapprove a rule from the Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration revising provisions of the Federal Acquisition Regulation to require federal contractors to disclose findings of noncompliance with labor laws. The Senate is then scheduled to vote on the motion to proceed to H.J.Res 44, a resolution of disapproval of the Bureau of Land Management’s Resource Management Planning rule, finalized in December 2016. The regulation establishes the procedures used to prepare, revise or amend land use plans pursuant to the Federal Land Policy and Management Act of 1976, but congressional Republicans, state and local governments, and affected property owners have argued that the new process creates more confusion and greater uncertainty. The White House has announced support for both resolutions of disapproval, indicating the president would sign them into law upon Senate passage (both resolutions have already been approved by the House).

Senate floor activity for the remainder of the week is uncertain. It is possible the majority leader will initiate action on the nomination of Seema Verma to serve as Administrator of the Centers for Medicare and Medicaid Services. The nomination was advanced by the Senate Finance Committee last Thursday on a straight party-line vote.

On the other side of the Capitol, the House will return to legislative business on Tuesday, when members will consider seven bills, including five measures under the jurisdiction of the Transportation and Infrastructure Committee, under suspension of the rules.

On Wednesday, House members will consider three additional bills under suspension of the rules, all reported by the Natural Resources Committee.

The House will then take up H.R. 1301, the Department of Defense Appropriations Act for FY 2017, subject to a rule. The funding bill would replace the Department of Defense provisions of the current continuing resolution for FY 2017, which is set to expire on April 28, and provide funding through the end of this fiscal year, which ends on Sept. 30. The legislation meets the overall defense spending limits set by law for FY 2017, providing $516.1 billion for base budget needs. The bill also provides $61.8 billion in Overseas Contingency Operations funding, which is the level allowed under current law. These amounts are also in line with the National Defense Authorization Act signed into law by President Obama in December. Unlike the Defense Appropriations bill that passed the House on a party-line vote last summer, this version of the defense spending bill maintains statutory budget limits. As a result, it is likely to garner more bipartisan support for House passage in this session of Congress. Press reports indicate the Trump administration is preparing to request an additional $30 billion in supplemental funding for the Department of Defense in FY 2017, largely for readiness spending, but it remains unclear how Congress will respond to any supplemental appropriations request. It also remains unclear how or when Congress will deal with funding for the 10 remaining FY 2017 spending bills before the continuing resolution expires on April 28.

During the remainder of the week, House members will consider three pieces of litigation reform legislation reported out of the House Judiciary Committee. Each will come to the floor under a rule.

On Thursday, the House will take up two of these measures. H.R. 725, the Innocent Party Protection Act, limits the ability of federal courts to remand cases to state court under certain circumstances. Members will also consider H.R. 985, the Fairness in Class Action Litigation Act of 2017. The bill includes language from a previous class action reform proposal, which passed the House in 2016, to prohibit federal courts from certifying any proposed class under Rule 23 of the Federal Rules of Civil Procedure unless the party seeking to maintain a class action demonstrates that each member of the proposed class suffered an injury of the same type and scope. This version of the legislation also includes some additional provisions related to class action litigation, including disclosure requirements on third-party litigation financing.

The third litigation reform bill will be considered on Friday. H.R. 720, the Lawsuit Abuse Reduction Act of 2017, would amend Rule 11 of the Federal Rules of Civil Procedure to make the imposition of sanctions for violations of the rule mandatory, not discretionary as under current law.

Also this week, House Republican leaders are expected to release their proposal to repeal and replace the Affordable Care Act.  Once the bill is released, committee action is on tap, with markups this week, and prompt floor action can be expected as early as next week.

With all committees now organized, both chambers are facing busy hearing schedules.

 

The election of Donald Trump creates a drastic shift in government relations strategies in DC.

With a new year, companies and not for profits should be reevaluating their government affairs programs just as they will review their tax, marketing and financial planning. More significantly, this year, a new U.S. government will form, and a new presidential administration commence.

U.S. and foreign businesses and industries should accordingly carefully review their government relations, lobbying, and public affairs strategies in Washington, DC. Companies that have engaged in government relations during the Obama years now need to fully re-write their government relations plan in a city soon to be led by President Donald J. Trump. Those engaging in government affairs for the first time need to move fast.

Trump’s executive team promises to be very different in governing philosophy, public policy, and management than President Obama’s team; but based on Trump’s cabinet picks; it will be substantially different than President Bush’s as well.

Based on that absolute shift, business and industry must reevaluate its government relations strategy for 2017. With a new pro-business focus, no company or industry will want to be on the sidelines for the next four years. Those businesses that have existing government affairs efforts in Washington need to reassess and revise old plans and write a new ones. And those that want to engage in a first-time government relations program need to get in the game now. Based on President-elect Trump’s cabinet choices thus far, the policy and management differences with the outgoing Obama Administration will be substantial; aimed at systemic change in nearly every area of government policy that affects business:

 

  • Appropriations, budget, tax, trade
  • Energy, oil/gas, renewable energy, energy management
  • Transportation, infrastructure, air and shipping transport
  • FCC and telecom
  • Financial services, Dodd Frank, digital assets
  • Healthcare, life sciences, pharma, medical technology
  • Gaming, hospitality
  • Education
  • Municipality
  • Labor, immigration
  • Ocean technology, environment, climate
  • Internet, cyber, privacy, social media
  • National security & defense
  • International Relations

 

Thus, if your company has had a government relations effort during the Obama Administration, then a re-evaluation is critical because what was advocated by the U.S. government between 2009-2016 will now be substantially dismantled and replaced with a new governing philosophy and public policy agenda.

For instance, President-elect Trump has chosen conservative U.S. Rep. Tom Price to serve as his Secretary of Health and Human Services and to overhaul the Affordable Care Act (ACA) (Obamacare). Price is the former chair of the Republican Study Committee, the group of movement conservative members of the House of Representatives. Moreover, in 2013, he introduced in Congress a substantive bill to replace the Affordable Care Act.

Trump’s choice of Price to head HHS will stand in exact contrast to the political ideology and pro- ACA position of the current HHS Secretary, Sylvia Burwell.

Other members of his cabinet also come from a more conservative, pro-growth, limited government, less government regulation philosophy including Governor Rick Perry, as the new Secretary of the U.S. Department of Energy, Andrew Puzder, CEO, Hardee’s, to be Secretary of Labor, Scott Pruitt, Attorney General of Oklahoma, to head the Environmental Protection Agency (EPA), Linda McMahon, a principal with the Worldwide Wrestling Federation, as the new Administrator of the Small Business Administration, Dr. Ben Carson, the new Secretary of Housing and Urban Development, Wilbur Ross as Secretary of Commerce, Steve Mnuchin, Secretary of the Treasury, U.S. Rep. Rep. Ryan Zinke, the next Secretary of the Interior, United States Marine Corps General James Mattis (ret.) as Secretary of Defense and Betsy DeVos as Secretary of Education.

To be fully prepared, companies need to take the time necessary to strategize a new plan, hire the right professionals in Washington, identify the right issues for the company, and be a ready to educate the “new” U.S.  Federal  government.

Duane Morris Government Strategies has a Washington, DC-based government relations and lobbying office for U.S. and foreign companies, organizations, and governments that want to develop a more professional and interactive relationship with the U.S. federal government; Congress, the Executive Branch and regulatory agencies.

We can assist with congressional relations, regulatory affairs, developing positive brand equity for your company throughout the U.S. government, business to government (b2g) contracts, lobbying on specific legislative or regulatory issues, advising on current policy and political developments, and assisting with industry associations where your company is a member. We can provide a comprehensive, substantive and personalized suite of U.S. government affairs services for a cost-effective and competitive budget.

 

 

Final Week for the 114th Congress.

This is the final week of legislative activity for the 114th Congress, with the House and Senate expected to work through the outstanding items that remain for 2016.

Lawmakers are scheduled to be in session until Dec. 16, but resolution and passage of a spending measure to keep the government funded into 2017, the annual national defense authorization act, and the biomedical innovation bill, among a handful of other final legislative items should be finished this week, enabling members to depart Washington, D.C., at the end of this week.

Negotiations over a continuing resolution have been ongoing and press reports indicate congressional leaders are close to a deal that should be ready for a vote this week. Current government funding expires on Dec. 9. Although initial discussions on the CR were focused on a three-month extension of current spending authority into March 2017, leadership now seems to be agreed on extending that authority into April after acknowledging the reality of the congressional calendar. Both chambers are anticipating an active legislative agenda in the first few months of the 115th Congress, and the Senate will be particularly busy with the confirmation process for appointees to the new administration. Republican leadership recognizes that it would be challenging to add an appropriations deadline to the agenda in the first 100 days of the new session. Legislative text has not yet been released, but House leadership indicated on Friday that the text of the spending bill would be ready to permit a vote this week. Although the funding portion is easily crafted, many funding anomalies and various legislative provisions that can be agreed upon must be crafted, making the final drafting of the CR a laborious and time-consuming task.

In addition to the expected consideration of a CR this week, the Senate is set to take up two additional lame duck priorities. Following the successful passage of both the biomedical innovation bill (H.R. 34, the 21st Century Cures Act) and a $619 billion conference report to the National Defense Authorization Act (S. 2943) through the House of Representatives last week, the Senate is now poised to take action on these measures. Senators are scheduled to return on Monday for a procedural vote on the 21st Century Cures Act, legislation that will invest greater resources in medical innovation and speed up the process by which the U.S. Food and Drug Administration approves new drugs and devices. The legislation also includes additional provisions to address the opioid epidemic and to bolster the country’s mental health systems. There is widespread, bipartisan support for the measure, and even though several Senate Democrats have criticized the final version of the bill and announced their opposition, the legislation is expected to see Senate approval this week and be signed into law by the president.

Once the 21st Century Cures Act has been dispensed with, the Senate will begin consideration of the conference report to the National Defense Authorization Act, which passed the House last Friday by a vote of 375-34. This legislation provides an additional $8 billion in funding for overseas contingency operations and readiness shortfalls and covers the $5.8 billion supplemental request sent by the president to Congress in November. It also includes a 2.1 percent pay raise for U.S. troops. The funding in the bill is simply an authorization, and defense hawks have been critical of the CR strategy that congressional leaders have been pursuing because a CR will not provide the military with all of the funds authorized by this bill

The House is scheduled to convene again on Monday when it will take up six bills under suspension of the rules, including S. 1635, legislation authorizing the activities of the Department of State for FY 2017.

On Tuesday, members will consider a suspension package consisting of 21 bills, reported out of the Energy and Commerce, the Natural Resources, or the Veterans Affairs Committees.

On Wednesday and during the remainder of the week it is possible for the House to take up additional measures under suspension of the rules. Also expected for floor consideration is H.R. 5143, the Transparent Insurance Standards Act of 2016. The legislation would require the Treasury Department and Federal Reserve to provide additional reports to Congress on international negotiations regarding regulatory standards in the insurance industry. Chief sponsor of the bill, Rep. Blaine Luetkemeyer, R-Mo., chairman of the House Financial Service Committee’s Housing and Insurance Subcommittee, stated the bill is intended to “increase transparency and strengthen Congress’ role in supervising foreign standards setting organizations.” Consideration of H.R. 5143 will be subject to a rule. Finally, the House will tackle the CR when it becomes available.

Advantages and Disadvantages of Public Private Partnerships

Advantages and Disadvantages of Public Private Partnerships

There are many advantages and disadvantages of public private partnerships that should be considered before entering such a co- venture. A public private partnership refers to a venture in which funding and operations are run by a government agency or authority and a private sector entity. Over the years, public private partnerships have become increasingly popular internationally.

Public private partnerships are common in different areas including, infrastructure, transportation and gas and oil exploration.

Today, governments at all levels are faced with budgetary constraints yet the public needs them to deliver certain services.  Simply put, partnerships between the public and private sectors are critical in ensuring that a country develops economically.

One of the major advantages of public partnership is efficient management. Efficiency is very important in the management of developmental projects. This is achieved when the public sector and private company work together on a project. Plans as well as strategies are formulated and implemented more efficiently.

Another advantage of public private partnership is the improvement of the quality of the end results of a project. Partnership between a public agency and a private company brings technological advancement. This provides the necessary solutions for the completion of a project. Many private companies have highly advanced technology. When the government partners with such companies technology that is needed to deliver quality results is achieved.

The speed with which projects are executed is also enhanced due to the combined efforts of the government agency and the private company. In addition, the cost of accomplishing developmental projects is reduced through public private partnership. Both the government and the private company provide the necessary capital for development projects.

Nevertheless, there are drawbacks or disadvantages of public private partnerships as well. The difference in the work culture is one of the disadvantages of this venture. Differences in the functioning of a government agency and the private sector company can cause problems in the execution of the project.

Changes in government policies, often caused by changes in the electoral make up,  can also affect the model of the public private partnership. Such changes can affect capital flow or direction to favor the government leading to losses for a private company. This is one of the reasons why some companies fear to get into public private partnerships.

Mismanagement of the project is another disadvantage of a public private partnership. Mismanagement of the involved project is always a threat to the programs that are undertaken by the private and public sector. This is caused by unanticipated or unplanned challenges that lead to loss of resources that can benefit the government.

N.J. Supreme Court upholds freeze on pension cost-of-living adjustments

The New Jersey Supreme Court ruled 6-to-1 Thursday that the state can continue to freeze cost-of-living adjustment payments to those collecting public pensions.

The decision upholds a 201l reform law to suspend the payments that was supported by Democrats and signed by Christie. According to the Associated Press, the ruling will save the state approximately $17.5 billion in added pension liabilities.

Thursday’s ruling received cautious optimism from Moody’s Investors Service, which said it “eliminates a major threat to the state’s fiscal stability, which is already challenged by narrow reserves and large, rapidly growing pension costs.”

“New Jersey’s finances have been more stable in recent years, and the state projects that 2016 reserves will remain on target and above prior years at $550 million,” Moody’s said. “However, reserves at this level will provide limited cushion against further budget volatility.”

Earlier this week, the Assembly Judiciary Committee advanced a measure that seeks to task voters with deciding on a constitutional amendment to require regular pension payments.