Public Policy address a public issue

Public policy is an attempt by the government to address a public issue. The government, whether it is city, state, or federal, develops public policy in terms of laws, regulations, decisions, and actions.

Public pays the taxes to the Government to be used for the welfare of the public. Today people expect government to do a great many things for them. Indeed there is hardly any personal or societal problem for which some group will not demand a government solution. Public policy designed to alleviate personal discomfort or societal unease. But the government may be constrained by the resources, efficient utilization of resources and level of risk involve in the development project undertaken by the government.

The main objective of the government is to work for the welfare of society by whatever the approach to be used. Public Private Partnership is an approach being used by different countries for the public provision of goods and services. Keeping in mind, the inefficient utilization of resources by public sector, PPP is a good option for the government to ensure the welfare of the public. Government has to perform lot of activities for the infrastructure building. If the government budget is in deficit and government is constrained by resources than govt pursue ppp to meet the need of the public.

PPP is collaboration between government and private sector to ensure the well being of the public. This collaboration leads to win-win situation for both the government and private sector.

How PPP is Lead to Win-Win Situation:

A win-win situation is created from the collaboration of Govt. and the private sector through Public-Private Partnership (PPP).

PPPs can be defined as "an arrangement of roles and relationships in which two or more public and private entities coordinate in a complementary way to achieve their separate objectives through the joint pursuit of one or more common objectives" (Lawther, 2002). With PPPs, the private sector aids government in identifying new private-sector financed profit-making facilities, and seeks out new projects that would otherwise have to wait until government funds become available.

The benefits while carrying out the projects through PPP is that both the public and private sector are in a win-win situation. The government’s limited budgetary resources are leveraged a number of times for investments in infrastructure. The assets/activities in public domain are run efficiently by the private sector on a competitive and transparent mechanism. The risks are properly allocated and shared by both the public and private sector, thus resulting in benefits to both the parties.

The foundation of a private-public partnership is division of labour - with each partner putting in one's best strength area - towards a mutual goal. In such partnerships, a deep-pocketed body may not be expected to shell out money, instead it may be asked to spend its professional man hours in upgrading a curriculum or developing a product (like economically priced fortified biscuits!) to help society. "Largely, such partnerships give the private sector room to innovate - for which it's known - and utilize the reach and infrastructure of the public sector to make it a win-win situation for the private player (NGO, corporate or an individual), government and community" points out Sridhar Rajagopalan, managing director, Educational Initiatives Pvt Ltd.

Sectors in which PPPs have been completed worldwide include:

• power generation and distribution,

• water and sanitation,

• refuse disposal,

• pipelines,

• hospitals,

• school buildings and teaching facilities,

• stadiums,

• air traffic control,

• prisons,

• railways,

• roads,

• billing and other information technology systems, and

• housing.

Benefits to the public sector by adopting PPP:

Risk Transfer;

The main objective of the government is to transfer the risk to private sector. Level of risk depends upon the nature of the agreement between public and private sector. If private sector finance the project than the more level is risk is being transfer to the private sector.

Efficiency;

By taking advantages of private sector innovation, experience and flexibility, PPP can often deliver services more efficiently and mobilize the resources more efficiently.

Budget Constraint;

Government has to perform lot of activities for the infrastructure building. If the government budget is in deficit and government is constrained by resources than govt pursue ppp to meet the need of the public.

Improve service delivery by allowing both sectors to do what they do best. Government's core business is to set policy and serve the public. It is better positioned to do that when the private sector takes responsibility for non-core functions such as operating and maintaining buildings.

Improve cost-effectiveness. By taking advantage of private sector innovation, experience and flexibility, P3s can often deliver services more cost-effectively than traditional approaches. The resulting savings can then be used to fund other needed services.

Increase investment in public infrastructure. Investments in hospitals, schools, highways and other provincial assets have traditionally been funded by the Province and, in many cases, have added to levels of overall debt. P3s can reduce government's capital costs, helping to bridge the gap between the need for infrastructure and the Province’s financial capacity.

Reduce public sector risk by transferring to the private partner those risks that can be better managed by the private partner. For example, a company that specializes in operating buildings may be better positioned than the government to manage risks associated with the changing demands of commercial real estate.

Deliver capital projects faster, making use of the private partner's increased flexibility and access to resources.

Improve budget certainty. Transferring risk to the private sector can reduce the potential for government cost overruns from unforeseen circumstances during project development or service delivery. Services are provided at a predictable cost, as set out in contract agreements.

Make better use of assets. Private sector partners are motivated to use facilities fully, and to make the most of commercial opportunities to maximize returns on their investments. This can result in higher levels of service, greater accessibility, and reduced occupancy costs for the public sector.

Benefits to the Private sector:

Why would the private sector be willing to assume these risks? Because where risk exists, so does opportunity. The private sector partner gains a relatively stable, long term investment opportunity. Revenues are in the form of either a fee for service, paid by government, or fees collected from users, as in the case of highway tolls.

Benefit for private sectors.

Investment opportunity

Revenue generation

Can create additional opportunity

Government support.

P3s give the private sector access to secure, long-term investment opportunities. Private partners can generate business with the relative certainty and security of a government contract. Payment is provided through a contracted fee for service or through the collection of user fees - and the revenue stream may be secure for as long as 50 years or more.

Private sector partners can profit from P3s by achieving efficiencies, based on their managerial, technical, and financial and innovation capabilities. They can also expand their P3 capacity and expertise - or their expertise in a particular sector - which can then be leveraged to create additional business opportunities.

A successful PPP depends in large part on the capacity of the government to keep the contract on track. This entails setting clear requirements of the partnership, monitoring the performance of all parties to the contract, reporting on results, and enforcing contract provisions that are not met.