Public private partnerships in Britain: Interpreting recent experience

Britain was in the forefront of utilising Public-Private Partnerships (PPP) and contracting out from the 1980s. The British experience of increasing disenchantment with private finance and outsourcing in recent years is therefore of considerable interest. Private contractors have not proved invariably better at managing government services than direct government supply. Nearly complete measurement of the service is highly desirable if the supply is to be successfully contracted out or provided by a PPP. Though potentially beneficial for controlling project whole life costs, bundling different stages of supply boosts the size of the contract, which in turn reduces the number of potential competitors and the intensity of competition for the contract. Credible risk transfer continues to be challenging. H M Treasury project appraisal in some respects was biased in favour of private finance projects and yardstick competition between procurement routes remains underutilised. Private finance has been shown an expensive way of massaging the national debt-gdp ratio, although less than 10% of government investment is at stake. On the other hand, considerable experience has been obtained in controlling whole life project costs with other, simpler, procurement routes.