Public Private Partnership

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Public-Private Partnerships(PPP):
A Reality Check and the Limits of Principal Agent Theory

Arie Halachmi, PhD
2011-2011 Distinguished Fulbright Professor

Abstract
Can partnership and contracting out of the production and delivery of what used to be performed by government improve public sector productivity? However, the reality does not always follow the theory. Using an actual case study and a Principal Agent Theory the paper explores and articulates possible limitations of Principal Agent Theory and some issues and possible implications for practitioners and academicians.

Key words: Public Private Partnership (PPP), Education, Principal –Agent, Principal

Bio: Arie Halachmi, PhD is the 2001-2011 Distinguished Fulbright Professor at Linz University (Austria) and the recipient of the American 2010 Paul van Riper Award for significant contributions to the theory and practice of public management. He is professor of Public Management at TSU (USA) and research professor at the National Center of Public Administration at Sun Yat-Sen University (China). Public-Private Partnerships(PPP):

A Reality Check and the Limits of Principal Agent Theory
Arie Halachmi

Introduction
Contracting out of the production and delivery of services that used to be performed by government is now a common practice in today’s society. Many times this is accomplished through the use of Public-Private Partnerships (PPP). Public-private partnerships as a rubric for describing joint ventures between government and private entities, is very salient topic as can be seen by growing number of panels addressing this subject at the annual conferences of the American Society of Public Administration between 2000 and 2010. Organizations ranging from the European Union to Canadian Heritage not only endorse the partnership idea but actively employ it as a programmatic tool for adapting to what they perceive as changing needs and circumstances (Kinnock, 1998; Canadian Heritage, 1996). Further, its advocates tout it as the epitome of a new generation of management reforms, especially suited to the contemporary economic and political imperatives for efficiency and quality (Linder, 1999). According to Savas (2005) “The term “public-private partnership” is particularly malleable as a form of privatization. It is defined broadly as an arrangement in which a government and a private entity, for-profit or nonprofit, jointly perform or undertake a traditionally public activity. It is defined as a complex relationship-often involving at least one government unit and a consortium of private firms” This conceptual framework is consisted with the approaches of other writers such as Linder and Rosenau (2000). However, Savas also notes that “despite its ambiguity, “public-private partnership” is sometimes a useful phrase because it avoids the inflammatory effect of “privatization” on those ideologically opposed.” Further, (Schaeffer and Loveridge, 2002) are concerned that the widespread use of the term public- private-partnership for a variety of public-private cooperative efforts implies a commonality among them that does not exist. They note that differences in characteristics of private-public cooperation that are important to their success or failure may therefore be overlooked. Referencing other writings on the subject, they repeat an earlier suggestion that the range of projects described as „public-private partnerships“ is enormous and voices the suspicion of (unnamed) critics and skeptics „…that these so-called „partnerships are in fact a way of subcontracting or grant making.

A comprehensive phenomenological discussion of PPP is beyond the scope of this paper. However, some closer considerations of few issues concerning the use of performance measurement and, consequently, about public accountability issues when it comes to PPP are warranted.

This paper seeks to address some of these issues by the use of an actual case study...
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