PPPs and FM
Public private partnerships – what are they and why are they useful? MARLON GIULIANI asks and answers these important questions and more.
Collaboration is the lifeblood of innovation. Partnerships are critical for driving change and improvements in our infrastructure across the globe and I believe that public private partnerships (PPP) play an important role in this process. They are uniquely placed to allow governments and the private sector to work cooperatively together to reach a common goal, for example, on long-term projects such as the Sydney Metro.
Having worked in the industry for over 20 years, I see our biggest current challenge as keeping apace with society’s growing demand and believe that utilising the PPP model in a considered fashion can help us achieve this.
Initially popular throughout Europe, PPPs have now become more commonplace in the southern hemisphere. The model has been praised for delivering projects on time and within budget, with high-profile projects such as the Royal London Hospital demonstrating the potential opportunities. The unique benefits that PPPs offer, particularly around funding and collaboration, are key drivers in the popularity of the partnership model.
What are they?
This type of agreement is made between two parties, a public element (usually government) and a private business. The parties enter into a contract whereby they work together and share resources to develop a specific piece of infrastructure that is in the public interest (such as hospitals, train stations, roads or sporting stadiums). Usually high value, these projects tend to be long-term developments that require a significant commitment from both parties.
Among other things, I have found PPPs to be effective for capitalising on private sector strengths and access to funds.
Why choose a PPP?
Collaboration is encouraged. More creative solutions can be achieved when public and private sectors work together, compared to an initiative that is wholly public or private. New, fresh ideas are generated and better design and construction approaches suggested. A strong alignment of values between parties enables better outcomes for both and, ultimately, the infrastructure.
Operational efficiency tends to be high. Private sector technology aids with faster project completion timelines and reduced delays, keeping up with public sector performance measurement requirements. These are often extensive and there is financial commitment required to deliver projects on time and within budget.
Financing a project through a PPP can allow the development to be completed sooner than a solely publicly funded project would be. Having access to private money often actually means the infrastructure development is a possibility in the first place.
Competition is limited. For those private companies able to complete a project, this type of work can be extremely beneficial and an indicator of a long-lasting partnership with a public body. If there are a limited number of private companies able to provide the relevant services, competition can increase the quality of construction, design and consulting services across the industry.
Risks are appraised early to determine project feasibility. The private partner can therefore provide a check with government expectations. However, if the project completion is delayed, exceeds cost estimations or has technical defects, the private partner typically bears the burden. Although, the government could also be held accountable for any compensation costs.
The importance of PPPs for FM
In our industry we need to fully understand our clients or partners. Taking the time, prior to development, to identify objectives and common goals and to understand the environment, as well as the complex commercial considerations, is vital for success and is a key part of long-term partnership agreements.
Having worked on many PPPs throughout their life cycle, I have learned that it is crucial to truly understand the key drivers and objectives of a project before any construction begins. This saves time and helps the team to provide better solutions for the end users, not only the commercial partners. There is time to properly consider the needs of all stakeholders.
Breaking down barriers with partners is key to a successful PPP and, in my opinion, a successful working relationship. At City FM we are passionate about providing transparency and ensuring a collective alignment on a common goal. Getting to know your partners creates trust and longevity, but also sets you up for success in a PPP.
As with every complex contractual agreement, there are risks associated with PPPs. It’s worth being prepared and engaging early. True open collaboration leads to innovation and with the ever-changing needs of our increasingly connected society, this approach is imperative for the FM industry and the built environment.
Marlon Giuliani is the general manager of Strategic Partnerships at City FM Australia. He has over 20 years’ experience and is an expert in managing and brokering complex commercial contracts. Specialising in negotiating long-term, mutually beneficial agreements, Giuliani’s expertise supports the unique partnership model that City FM implements.
Image: 123RF’s Anar Mammadov © 123RF
This was originally published in the Apr/May 2019 issue of FM Magazine.