Public private partnerships

"Wherever possible, the government will seek out opportunities to engage in public private partnerships. The end purpose would be to attain a better product or a more efficient service at a lower cost" - Prime Minister and Finance Minister Lawrence Gonzi, budget speech 2005.

Public private partnerships are not an end in themselves. However, experience has shown that once effectively implemented PPPs can be a successful tool in terms of managing the desired public sector reform through the improvement of the quality of public sector delivery and, equally important, doing so in a more cost-effective manner. A better service will mean an improved quality of life for our citizens. An important component within this process is the private sector.

Unfortunately, misconceptions about PPPs abound. They are not privatisations; they are surely not just another way of the government contracting what it used to formerly do to the private sector or, worse still, the government retaining the risks while the private sector makes all the profits if all goes well.

We have had a number of attempts in the past; some have been more successful then others. The private sector is full of ideas of how it can be involved, forwarding proposals as to what it can do better and in what it believes to be a more cost effective manner.

While we need to ride on this enthusiasm, we also need to ensure that both the public and the private sector are appropriately prepared.

Within the public sector we need to ensure we have the proper processes, structures and people in place to ensure that the business case is there, risks have been addressed, the quality of the service and deliverable have been appropriately defined and, more importantly, that the transferring out to the private sector will be more cost-effective to the government.

One must keep in mind that these projects will still be regulated by the service requirement established by the government and the public service and by EU procurement and national accounting regulations.

However the private sector also needs to be prepared. What is the government expecting from the private sector? What are the risks the private sector is expected to take over? How does one bid for such projects? Does one need specialist expertise? How does one raise finance for a PPP project? What are the payment mechanisms like?

The private sector needs to appreciate that PPPs are primarily projects that involve service and deliverable quality definition (the project scope), competitive negotiated procurement, project control and finally service delivery monitoring. This implies that projects and the services delivered thereon are of a long term and relatively of a high value nature and that therefore consortia may have to come into play.

For successful participation, the private sector needs to invest in organising itself better, in specialising in professional service delivery and in innovating delivery to win business in a fair and competitive environment.

For a successful implementation we need a concerted drive to prepare both the public service and private industry to work together properly in what is a highly disciplined and transparent process. This is why we are extending an open invitation to industry players, financial and business services partners and the professions to join us at this very early stage in developing our PPP process. This is the prime objective of the seminar being organised by the Ministry of Finance and the City of London with the theme Public Private Partnerships: Getting Down To Business on Wednesday.

The Ministry of Finance will manage the PPP process and this to ensure budgetary and regulatory discipline as the government enters into 15-20 year financial commitments, that is, over the service delivery cycle of the PPP projects.

Having reviewed PPP processes in other countries, it is our intention to make the Malta process a practical one so as to encourage SMEs to participate. We believe that the type and value of the projects we will bring to the table will be interesting both for the public and for the private sector as they are doable, of value to our country and interesting for the private investor.

The government wants to raise the standards in service delivery. We recognise the managed change required in both the public service and private industry to do this. We are starting up the learning curve now and inviting you to join us at this initial stage. Thus I would like to take the opportunity to invite all those who are interested to participate fully and influence the process. Our PPP partnership starts now.

Mr Fenech is Parliamentary Secretary in the Ministry of Finance.