The collapse of Carillion, the UK’s second largest construction and service company, followed closely by profit warnings from Capita, continue to raise questions over the way that public services are contracted out to private sector businesses. It is inevitable that some local authorities, housing associations and public sector bodies will choose to bring certain services back under their own control. But such is the extent to which essential services and significant development projects, such as housing, are outsourced to specialist companies, reports of the demise of public private partnership are premature.
Successful public-private joint venture structures require a great deal of honesty up front. Each party should openly declare what it needs to achieve from the project and determine the extent to which their prospective partner can realistically deliver. Ideally, key parameters are set out early on in the heads of terms.
Take for example, the case of local authorities and private residential developers; the shared objective of the delivery of housing will be driven by very different motivations. For private developers the bottom line is always going to be key, while local authorities need to build homes that best serve their local community and provide much needed housing. A public private partnership that brings these two objectives together under one unifying purpose can create an extremely powerful delivery force that achieves far more than either partner could on their own.