Researchers at the University of Maryland Recommend Ways to Reduce the Burden on the Taxpayer by Reducing Private Sector Resources

Mar 08, 2016, 16:18 ET from University of Maryland Center for Public Policy and Private Enterprise

COLLEGE PARK, Md., March 8, 2016 /PRNewswire-USNewswire/ -- Researchers examine how to reduce the burden on taxpayers by leveraging private sector resources.  The Center for Public Policy and Private Enterprise (CPPPE), located in the University of Maryland's School of Public Policy, recently released their report examining Public-Private Partnerships (PPP). The report identifies key criteria to be used in determining whether a PPP is the appropriate procurement vehicle for a given project and provides practical perspectives on establishing a PPP.  This timely report comes at a time in which the nation faces increasing fiscal challenges jeopardizing its ability to address many public needs in diverse areas such as infrastructure and defense.

Research Need and Background 

All levels of government are experiencing significant budgetary challenges that are not expected to subside in the foreseeable future. One only need look at the nation's roads, bridges, and dams—they were given a grade of D+ by American Society of Civil Engineers—to glimpse the extent of these challenges.  Considering that the projected public-sector investment gap is estimated to reach $1.1 trillion by 2020, public funding, by itself, will be insufficient. PPPs can help to bridge this gap.

PPPs are a contractual arrangement between a public agency and a private sector entity in which the skills and assets of each sector, including financing, are shared in delivering a service or facility for the public good. Though by no means a panacea, properly-structured and managed PPPs can help finance and deliver large-scale projects that might otherwise not be feasible for governments to fund and execute. PPPs have enabled governments to expedite project completion, reduce costs, and more rapidly introduce innovation.

However, at the federal level, existing laws and budget scoring rules impede the wider use of this procurement option. States have begun to expand the use of PPPs, largely to help finance highways and bridges, relying on subsequent tolling to provide the needed revenue. Beyond transportation, however, PPP use has been more limited, despite their applicability in sectors ranging from social services and energy, to utilities, technology, and defense.

"This report provides a framework for structuring successful partnerships by combining the strengths of both sectors," says Robert Orr, dean of the University of Maryland School of Public Policy. "Public-private partnerships are often more efficient in satisfying public needs in diverse sectors ranging from infrastructure and defense, to utilities and social services. Their use will continue to grow given the dynamism of the private sector and the significant fiscal challenges present at all levels of government."

This timely report identifies key criteria, derived through an examination of four case studies, which should be used to determine whether a PPP is the appropriate procurement vehicle for a given project. Policy makers need to ask the following questions:

  • Is the PPP project conceived to provide a measurable, direct public benefit?
  • Will private-sector efficiencies in design, management, construction, and other domains offset higher costs associated with private-sector financing and risk transfer?
  • Are project requirements amenable to a diverse array of solutions?
  • Can a PPP also facilitate other objectives, such as modernizing and streamlining through consolidation?

This report also provides practical perspectives on establishing a PPP.

The report can be downloaded at http://cpppe.umd.edu/publications/public-private-partnerships-leveraging-public-resources-public-good.  For more information please contact Dawn Pulliam, Director of Outreach, and Center for Public Policy and Private Enterprise, at 301.405.8258 or by email at cpulliam@umd.edu.  This independent research is partially funded by KPMG.

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SOURCE University of Maryland Center for Public Policy and Private Enterprise