Privatization determining the role of P3s.

• Author: Steitz, Kyle

Imagine that you are a child selling lemonade in your neighborhood. During the summer months, when business is good, you have a hard time finding enough staff to keep up with the demand. Your current staff is overworked, taking extra trips to the store to buy supplies, squeeze the extra lemons, and deal with longer lines. As a result, the quality of your lemonade is suffering. Worse yet, several of the neighbors have filed complaints about the customer service at your stand. If you hired additional staff, you would have little for them to do during colder months and you don't want to deal with letting anyone go. This fluctuation makes staffing difficult and you find yourself running at a substantial financial deficit while you wait for the warmer months to return.

Now imagine that there was an opportunity to bring in a group of neighborhood kids you could partner with to increase production capacity and help with customer service, only when you needed them--or if by working with lemonade experts, they could introduce you to equipment that would make your stand more efficient. It would still be your stand, but the extra help gives you more time to focus on what your staff does best.

For a kid's lemonade stand, this kind of outsourcing is pretty obviously a good idea. Other kinds of outsourcing are a bit more complex. Still, the ideology and concept behind this analogy is useful when approaching the way a jurisdiction's building department operates.

DEFINING PRIVATIZATION

Historically, public-private partnership (P3) agreements have been focused on economic development projects proposed by developers who are looking for financial assistance from a jurisdiction that stands to benefit from the project. But these agreements have evolved to include a wide range of potential uses, and the term "P3" now implies any agreement that involves a contract between the public sector and the private sector that has the private sector providing public services or public benefits.

Governments that are considering a P3 need to fully understand the risks and long-term financial implications. When deciding to move forward with a P3 deal that is in the best interest of the public, a number of general considerations need to be evaluated. Some of these are generally applicable to all such contracts, such as the need for public participation, sound financial negotiations, and monitoring of performance and results. Others concern issues specific to P3s: preliminary...