The Pros And Cons Of Public-Private Partnership Practice

Decent Essays

Public-Private Partnership (PPP) practice has been increasingly prevalent in modern infrastructure delivery and public service provision, such as in transportation, electric power, waste management, health care, and other industries (Broadbent and Iaughlin, 2004; Essig and Batran, 2005; Hodge and Greve, 2007; Wang, 2015; Zhang et al., 2015). Popularity of PPPs is mainly attributed to some inherent efficiency advantages (Grimsey and Lewis, 2007; Hart, 2003; Yang and Wang, 2013). Unlike conventional public procurement, PPP takes an integration of financing, construction, operation and maintenance that granted to private sector. This internalizes previous stage’s external effect to subsequent one, since the private is responsible for the additional …show more content…

Positive collaboration is a significant feature of this mode (Bovaird, 2004; Wang, 2015), government agency and private sector are bilaterally dependent (Maskin and Tirole, 2008; Soomro and Zhang, 2013). Government capacity, which mainly refers to administrative efficiency and credibility, is defined as a prerequisite to successfully initiate the PPP project (Wang, 2015). Meanwhile, the private sector’s financial resource and business expertise constitute the efficiency advantages of PPP mode (Grimsey and Lewis, 2007; Hart, 2003; Maskin and Tirole, 2008). PPP practice depends on the interactive process that requires communication and negotiation with respect to mutual rights and responsibilities (Wang, 2015). However, there exists a potential interest conflict between public and private, since the former is committed to the social welfare (Bennett and Iossa, 2004), while the latter is always profit-oriented (Zhang et al., 2009). Indeed, this goal inconsistency does not benefit the persistent cooperation. Hence, it is necessary to develop an effective governance mechanism to address this coordination issue and promote the prosperity of PPP application (Clifton and Duffield, 2006; Essig and Batran, 2005). In this respect, formal contract scholars pay attention to private sector’s latent …show more content…

While in an uncertain environment, it is almost impossible to accurately forecast all contingencies in the future (Hart, 2003; Williams, 2008, 2011). In this case, the public agency cannot differentiate whether the bad PPP performance should be attributed to private sector’s opportunistic behavior or the adverse influence of external environment. This suggests that effective governance on PPPs should take the uncertain environment into

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