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In the public interest? A critical look at public-private partnerships in Australia shows that we are travelling down a hazardous road and should be seeking alternatives.

Article Excerpt
The connection between the provision of good quality infrastructure and collective provision has been a central part of Australia s economic history. It is a connection that has been undermined in recent decades by the processes of privatisation and is now being severed by the proliferation of public-private partnerships (PPPs). The latter aspect has become particularly pervasive in the restructuring of infrastructure provision and management policies by state governments.

Public-private partnerships involve the government opening up more opportunities for the private sector in the provision of infrastructure and services. PPPs can take many forms, but perhaps the best known are BOOT schemes (build, own, operate, transfer), where a company is responsible for design, construction, finance maintenance and commercial risks, and owns the asset for a set period (usually 20-30 years) during which time it operates it and collects user charges. When profits and costs have been recouped, ownership is transferred back to the government. BOO schemes are similar to BOOTs, except that the company retains ownership of the asset in perpetuity. A third variation is DBO schemes (design, build, operate), where a company finances construction, the government purchases the asset for an agreed price and takes all ownership risks, and the company retains the management function and related risks. Finally, there is the straightforward outsourcing of services previously delivered directly by government.

Between 1989 and 2001, PPPs with contract values totalling $5.5 billion in economic infrastructure alone were implemented in New South Wales. Concern over the growth of PPPs in providing social services and infrastructure has led the State Government to say that it will treat 'core services' in social infrastructure (such as health and education) differently to 'non-core services' and economic infrastructure (such as roads, power and water). That is, core services in social infrastructure will be provided by government, including the provision of medical and teaching staff. This allows private sector provision of infrastructure and 'ancillary' services, including cleaning, maintenance and non-clinical medical services.

The Government argues that the precise differentiation between core and non-core services will be determined on a case-by-case basis. In practice, there seems to be almost no limit. PPPs in NSW have been implemented or approved in a wide range of services and infrastructure, including schools, hospitals, prisons, housing and aged care facilities, as well as in construction, maintenance and operation of infrastructure assets in transport and utilities.

Privatising the Profits and Socialising the Risks

Proponents of public-private partnerships claim that PPPs provide significant social and economic benefits. It is argued that PPPs reduce government borrowing and free up public money for essential services. Emphasis is also put on the role of PPPs in the sharing...

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