With today’s Federal election in Canada, there is talk around dinner tables across the country about Privatization and Public Private Partnerships (#P3s) for the delivery of essential services and infrastructure development. This is of significant interest to our teams at TACK10 Strategy because Public Private Partnerships have the ability to be very valuable Strategic Partnerships if they are set up with the right expectations and all of the partners share in the risk and the reward equally.
The National Conversation
The first thing that becomes apparent when we analyze the national conversation is that Public Private Partnerships and Strategic Partnerships are often misunderstood and the expectations of and on the partners are not clear. This is the conversation at the dinner table, online and in boardrooms around the country; the models, expectations and anticipated outcomes of these partnerships are not clear. What is extremely clear, however, is that our current trajectory of spending is not sustainable. We are at a pivotal point right now where our public spending and subsequent borrowing will leave future generations with debt loads that are simply unmanageable. Essential services, transportation, infrastructure and social service organizations to name a few require the ability to leverage strategic partnerships in order to remain able to serve the citizens who rely on them and need them to continue investing and evolving to meet changing and growing needs.
Dispelling The Myths
The major misconceptions around public private partnerships or strategic partnerships is that private companies enter into these partnerships to drive profit for themselves at all costs. While they certainly enter into these partnerships because they see the potential to profit, well defined expectations and performance targets can and must be put in place to ensure that these partnerships are creating shared benefit and shared risk of equal or similar value for all stakeholders. With proper framework and clearly identified roles and responsibilities, these strategic partnerships allow organizations to eliminate or greatly reduce their internal constraints.
A Practical Example
A great example of this in healthcare, an area where privatization tends to be an extremely sensitive topic, is the Shouldice Hospital in Toronto, ON. While is it a private, for-profit clinic that performs hernia surgeries, it operates through a partnership with the Ministry of Health and Long-Term Care in Ontario. This example is quite relevant because the key concerns I hear about privatization tend to be that costs will go up, service levels will go down and the universal accessibility of services will be jeopardized. In reality there is a long history of successful public-private care in Ontario. In 1973, Ontario outlawed private hospitals and while those that existed were grandfathered in, no new private hospitals could be opened. Today, six of seven private hospitals still in operation are covered by the Ontario Health Insurance Plan (OHIP) and they continue to be leading facilities for the services they offer. In fact, while Shouldice is an extremely profitable business for its owners, the level of their medical care has continued to improve and they are world renowned for their hernia procedures which have a lower rate of recurrence than in our traditional public hospital procedures.
Who Should Own the Risk and the Reward?!
Strategic Partnerships are defined as partnerships between two or more groups to create shared benefit of equal or similar value. If each entity in a partnership is meant to benefit equally, it would make sense that each shares equally in owning the inherent risk involved with any partnerships.
Equal Risk = Equal Reward
Our experience is that strategic partners do not intentionally enter into these partnerships with a mindset of ensuring their partner carries the majority of the risk and extracts minimal value. Unfortunately what we see far too often is that the organization or agency seeking private sector partners is so focused on the value they are looking to ‘take’ from the partnership that they forget about the need for them to create shared benefit of equal or similar value. A large part of creating this shared benefit is sharing in the associated risks with partners and recognizing that private sector organizations will have expertise along with the license to do things in a way that would be impossible for the public sector.
The Final Bell
It is extremely clear that private companies want to support and leverage strategic partnerships with the public sector. ‘Profit’ and ‘Private’ do not have to be bad words. What we tend to see across well designed public private partnerships and their leveraging, managing and measuring of the Nine Core Value Drivers of Strategic Partnership™ is increased efficiency, decreased risk and increased return on investment for all stakeholders.