Private Delivery of Public Services: Public Private Partnerships and Contracting-Out

Abstract

This paper examines two types of relationships that the private sector and government engage in: contracting-out and public-private partnerships (PPPs). This paper defines these relationships, and reviews the issues and theory underlying private sector delivery of public services. Specifically, the subjects of study are the economic rationales motivating new delivery methods, the issues involved in structuring these arrangements, the process of project selection and implementation, partner selection, accountability, and the institutional implications that arise. An examination of the policies and projects that jurisdictions have implemented, with a focus on Ontario, will be conducted. Ultimately, structuring these arrangements successfully requires more than a business-like or bottom-line approach by government. Many pitfalls can beset the development of private sector delivery arrangements. The gains available from private sector involvement do not accrue from the simple action of involving the private sector. An integrated and robust accountability and evaluation framework in place throughout the entire procurement process, from project identification to implementation, is required to maximize the gains from private sector delivery. The breakdown or absence of such mechanisms can lead to losses that more than offset any expected benefits. Strong oversight mechanisms are also required to gain political acceptability. The government must be able to demonstrate to the public that private sector service delivery arrangements yield real benefits over traditional delivery methods.