Public-private partnerships (PPPs) in OECD countries currently represent about 0.8 trillion USD, and there are projects in the pipeline of about equal value. Clearly, governments and the private sector see PPPs as an effective way of delivering important public service infrastructure. By combining private sector innovation and financing, and sharing the risks in innovative ways, PPPs can provide much needed savings for the public sector and a fair deal for the private sector.
However, experiences from our Member countries show that it can be difficult to get value for money out of PPPs if government agencies are not equipped to manage them effectively. Moreover, PPPs can obscure real spending and make government actions un-transparent, using off-budget financing. This means PPPs are potentially risky for fiscal sustainability, possibly leading to credit rating downgrades as has happened in some OECD countries.
The new OECD Recommendation on Principles for Public Governance of Public-Private Partnerships can help governments get PPPs right, by providing best practices based on Member country experiences with what works (and what does not).
The Principles will help ensure that new PPP projects add value, and prevent ill-designed projects from going forward. For instance, they offer concrete guidance on when to use a PPP – not for projects using rapidly changing technology such as IT, but possibly for those using well-known, generic technology such as building roads. They focus on how to align the different parts of the public sector to ensure success: institutional design, regulation, competition, budgetary transparency, fiscal policy and integrity at all levels of government.
The Principles also stress that just as much attention should be devoted to the PPP after the deal is done – i.e. during the operational stage, which can often be 20-30 years.
With the help of the OECD Principles, governments can make sure that their partnerships with the private sector provide value for public money in a transparent and effective way.