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Example Posters: Advanced
(Masters)
(Masters)
[8] State-Market
At the state-market interface, we find public organizations that are (partly) government-owned, for-profit oriented and that produce a (semi) public good such as infrastructure. We find most public-private partnerships in this category, as well as majority-controlled state-owned enterprises (SOE) with either a systems or public utility function, like banking, electricity, water, rail, internet or postal services.
Agency Challenges
- Level of transparency requested in tendering processes (information-asymmetries; information that is competition-sensitive);
- Setting appropriate performance criteria related to risk-sharing/risk-bearing;
- Exit option of government (taxpayer) is very limited, as it concerns public goods/services);
- Handling contingent liabilities (fault finding / attribution);
- Under-reporting by contractor of liabilities/unforeseen circumstances, risks;
- Information-asymmetry in (technical, expert) knowledge between government officials and private party / contractor.
Typical Strengths
- Increased efficiency / operational performance / quicker realization;
- Lower marginal costs of public goods, while pursuing social welfare objectives;
- Risk sharing; investment in activities/ projects that either the public authority or the private sector would be unable or unwilling to complete alone;
- Performance-based payment;
- Contractual stipulation of risk-bearing/ responsibilities / performance standard;
- Access to innovative solutions/techniques/methods (tendering selection process, market competition);
- Leveraging private finance with public funding.
Typical Weaknesses
- Political interference may distort the public mission and commercial orientation;
- Risk aversion /shirking in case of joint responsibilities or delegated (contracted) responsibilities;
- Risk bearing comes at a price: private party will ask for surplus, which may make a PPP costly;
- Public party often still 'responsible' for realization (public goods provision), so considerable expense may be involved for a public authority where a project has gone wrong; or
- Risk transferred from taxpayer to private company to bear residual/unforeseen costs/contingent liabilities.
