Wikipedia

Frank Schnidman

A public-private partnership is like a marriage. There’s negotiation. But the bottom line is that whether it’s raising children or saving money for a new house, or planning a vacation, there are negotiations. And the strengths of one partner and the strengths of the other partner combined really makes the relationship work.

Japan is very protective of traditional roles, and government bureaucrats may not feel it is appropriate to have the private sector involved in the decision-making process. The government bureaucrats, however, feel comfortable hiring the private sector as their consultant to do all the work. It’s like the traditional view of the Japanese male-dominated society where a man gets married and expects that his wife is going to follow all of his guidance and decision-making.

In Japan, my observation is that in many instances, the local government officials chose not to consider or understand the P3 concept because they are accustomed to total control. However, when financial resources are not available to fund desired government projects, a solution is needed, and the private sector can be part of that solution. Yet, the private sector will not risk their money in a joint venture with local government unless there’s a contract that guarantees government obligations and responsibilities, and clearly defines the expectations for action by the private sector..

Training of government officials is needed to understand P3, and to recognize that the traditional governmental control and private sector consultant role has to change if Japanese local government is to continue to adequately serve its constituents. Government simply no longer has the money to adequately finance all of the identified needs. And, there has to be inclusion of the citizens in the decision-making process—effective community engagement to clearly identify the goals and objectives of the P3.

P3 Is a Learning Experience—and Sometimes Amendment Is Needed

From my own personal experience, I provide a simple example. I spent 14 years on the board of directors of a Florida public sector/private sector Japanese museum and gardens. We had entered into a P3 with a vendor to provide our restaurant and catering services. The museum provided the space and the vendor built out the restaurant. The museum shared in a percentage of the revenue. Our agreement worked well for a number of years, but in time the restaurant facilities needed renovation, and the revenue was not growing.

The solution was to amend the P3 to incentivize through greater reward a renewed commitment to quality and to promotion. The museum agreed to pay the cost of the upgraded facilities, and to reduce the percent of revenue paid to the museum once revenue hit a never-before met annual sales of one million dollars. Now the museum has a new restaurant and enhanced catering capabilities to better serve the public, and the menu has been upgraded including more authentic Japanese selections, and servers taught to better interact with the customers to explain menu items and options for additional food or beverage that would complement initial selections. Immediately, customer satisfaction surveys of the museum experience let us know that the correct decision had been made, and the million-dollar sales goal has annually been met and exceeded. Even though the museum receives a lower percent of the revenue after that sales mark was reached, the total revenue to the museum is substantially greater, revenue to allow the museum to more effectively carry out its programs and exhibits.

P3—Sharing Risk and Sharing Reward

Comparing a P3 to a marriage commitment is an easy way to explain the relationship: a marriage between the government and private sector—with a strong pre-nuptial contract outlining the rights and responsibilities of the partners. A marriage is successful when there is a meeting of the minds, an understanding of mutually shared goals. In a marriage there may be surprises as the parties mature, and in the P3 there can be unanticipated challenges. In both relationships, good faith negotiation may be needed to correct and accommodate changed circumstances. In the P3, the contract should clearly govern how those negotiations should proceed.

In the end, a P3 takes advantage of the strengths of the government public sector and the entrepreneurial private sector to create a shared risk and shared reward situation that meets the government goal of providing for the public health, safety and welfare, and the private sector goal of adequate profit for its investment and labor.