Abstract
This study investigates the emergence of a collection of diverse organizations designed to enable and govern infrastructure public–private partnerships (PPPs). The authors use the concept of organizational fields as a theoretical lens to investigate this panoply of organizations in three international contexts: British Columbia (Canada), Victoria (Australia), and South Africa. They observe a similar set of actors in each of these “PPP-enabling fields” but detect significant variation in the actor characteristics and the way that they are arranged on different projects. They theorize on a number of PPP-enabling fields aspects, including typical project arrangements, predominant field intermediaries, and salient institutional logics.
Introduction
The pivotal role of civil infrastructure in enhancing public health and accelerating economic growth has been widely acknowledged in the literature (Estache, 2004). It thus remains a central part of improvement initiatives in both developed and developing countries. Although responsibility for infrastructure development in the previous century rested largely with the public sector, the last three decades have seen a shift toward greater participation by private actors. This shift formed part of a wider movement to reform the role and functioning of the public sector, driven by perceived public sector inefficiencies and the ascendance of liberal economic ideology (Batley & Larbi, 2004). Reforms broadly involved a reduction in the role of government—or, more accurately, a change in the functions it performs—and greater private sector involvement (Hood, 1991; Kaul, 1997; Osborne & Gaebler, 1992; Peters & Pierre, 2002; Rhodes, 1996; Salamon, 2002). This move toward private participation in infrastructure delivery has most recently involved public– private partnerships (PPPs): arrangements that involve private companies in the financing and provision of infrastructure, broadly aimed at overcoming public sector financing, incentive, and capacity constraints 1 (Bovaird, 2004; Kumaraswamy & Zhang, 2001).
Unfortunately, the international experience of infrastructure PPP implementations has not been perfect (Milmo, Inman, & Durrani, 2009). There have been multiple, highly publicized cases of public opposition to private provision of infrastructure and large numbers of contract renegotiations and cancellations. Moreover, Guasch, Laffont, and Straub (2002) have illustrated the complexity of delivering public benefit through these arrangements. We propose that these failures show up four main challenges that infrastructure PPPs face: (a) market failures associated with private infrastructure provision (rooted in the natural monopoly characteristics and externalities of infrastructure (Goldberg, 1976; Mody, 1996; Savas, 2000), (b) agency failures relating to the limited capacity of public entities, (c) perceived legitimacy issues surrounding private provision of public infrastructure, and (d) government opportunism stemming from the fact that infrastructure is plagued by what has been called the “obsolescing bargain”—once the facility is completed and in operation, the private developer loses much of its bargaining power in subsequent negotiations over tariffs or other matters (Ramamurti & Doh, 2004; Woodhouse, 2005).
There is a growing understanding among scholars that the move toward private participation in infrastructure does not simply substitute private sector capacity for public sector capacity, rather it requires new forms of public sector capacity to be developed to overcome these four challenges. The following quote from Dutz, Harris, Dhingra, and Shugart (2006) serves to illustrate:
This shift from traditional public sector methods places new demands on government agencies. They need the capacity to design projects with a package of risks and incentives that makes them attractive to the private sector. They need to be able to assess the cost to taxpayers, often harder than for traditional projects because of the long-term and often uncertain nature of government commitments. They need contract management skills to oversee these arrangements over the life of the contract. And they need advocacy and outreach skills to build consensus on the role of PPPs and to develop a broad program across different sectors and levels of government. (p. 1)
This assertion makes it clear that ensuring the success of PPP projects goes beyond successfully governing the projects that have been developed. Indeed, the recent history of PPPs seems to suggest that some projects are flawed from the outset (Klijn & Teisman, 2000). Of critical importance are the choices made in deciding which projects to pursue and developing these projects in a way that make them attractive to private investors, while still protecting the interest of users and taxpayers in general, including securing legitimacy and curtailing corruption. Moreover, actions are required that not only focus on the success of single PPP projects in isolation but also aim to sustain the wider portfolio of PPP projects, the PPP program.
Unfortunately, the majority of the work recognizing this need for public sector capacity is silent on where this capacity needs to be created. A noted exception is the growing literature on PPP units (Burger, 2006; Dutz et al., 2006; Farrugia, Reynolds, & Orr, 2008; Public–Private Infrastructure Advisory Facility [PPIAF], 2007), but even this literature greatly underplays the institutional settings of units and the way that they interact with other governmental departments. We propose that the need for PPP “enabling capacity” has not been answered by a reformation of public agents alone—rather a network of new “enabling organizations” (public, private, and nonprofit) has emerged in response. These organizations, in varying ways, attempt to enable the development and continued operation of PPPs for the benefit of public, private, and civic actors. We propose that the concept of organization field, found within institutional theory, can be usefully used as a theoretical lens to understand the panoply of PPP organizations. Specifically, we argue that these organizations need to be combined in varying constellations of field configurations to overcome the four challenges that infrastructure PPPs face.
This article attempts to underline this argument by looking at the way in which these networks of enabling organizations have been set up in three contemporary contexts, all belonging to the British Commonwealth: British Columbia (Canada), Victoria (Australia), and South Africa. This article forms part of a larger study on PPP-enabling organizations. Elsewhere (Jooste & Scott, 2011), we attempt to make preliminary sense of the global variety of present-day PPP-enabling field compositions by drawing on previous work by Scott and others (Scott & Meyer, 1991; Scott, Ruef, Mendel, & Caronna, 2000; Wooten & Hoffman, 2008) on organizational field characteristics. In this article, we hope to deepen that discussion by looking at three leading PPP-enabling fields in a comparative manner. It should be noted that our purpose here is not to comment on the efficacy of one field configuration over another. Rather our intent is to compare in detail our three leading PPP fields and to theorize about the implications of the observed similarities and differences.
Laying the Groundwork
Identifying Typical Types of “PPP-Enabling Organizations”
In previous work (Jooste & Scott, 2011), we identified eight main organizational forms that together form our concept of “PPP-enabling fields.” These organizations are as follows:
Sponsoring departments are the governmental departments that were traditionally responsible for infrastructure development. These agencies generally retain a central role in the development and regulation of PPPs. Examples of sponsoring departments include Public Works Ministries, governmental departments (such as those focused on health care, transportation, education, or justice), or subnational governmental divisions (such as governments at the provincial or local/municipal level).
PPP units are one of the most striking developments in response to the need for PPP-enabling capacity. These mostly governmental agencies have been established as central actors to develop and sustain PPPs in a region (Burger, 2006; Dutz et al., 2006; PPIAF, 2007). Generally, the units aim to improve the sustainability of PPP arrangements by (a) undertaking research and disseminating PPP information and best practices, (b) setting policy and proposing legislation on PPPs, (c) proactively identifying projects and developing them, (d) providing a consultancy service to other public agencies when engaging in PPPs, (e) funding PPP studies or project development, (f) playing a role in the monitoring (regulation) of PPP contracts, and (g) approving which projects are undertaken or, secondarily, giving advice to decision makers in the approval process.
The use of nonpublic service providers has been expanded by the introduction of transaction advisors. 2 These organizations are private service providers who assist sponsoring departments and PPP units in the formulation and negotiation of PPP arrangements. In general, they play a strictly advisory role, assisting governments to overcome technical capacity shortfalls when developing PPPs. Their focus is specifically on setting up the initial “transaction” by developing the project concept, managing the tender process, and guiding the contract formation.
A related organization type is what we refer to as transaction auditors, often referred to as probity auditors, or fairness advisors, or fairness monitors (Vogel, Kerans, & Casson, 2008). These are advisors who are appointed for the purpose of “verifying that the process culminating in the choice of a successful proponent was fair and even-handed” (Vogel et al., 2008, p. 1). The role of transaction auditor has also at times fallen to the auditor general (Ng & Ryan, 2001).
Public regulators are organizations focused on regulating the performance of the private providers after the contracts were awarded. For contemporary PPPs, the form of regulator is highly dependent on the type of arrangement regulated. The formal independent regulator model was developed specifically to address sectors that faced large-scale privatizations (such as energy and telecommunications). More recently, Greenfield PPP projects have seen the regulatory function residing within the sponsoring department (not in a separate entity). To achieve independence in regulation, many governments have made use of an auditor (such as the auditor general) or nonpublic regulators in addition to the sponsoring-agency regulatory body.
Nonpublic regulators have emerged in support of public regulators. This group of actors, which includes private consultants, technical specialists, and noted academics, are employed either to curb the discretion of public regulators (and increase their legitimacy) or to provide them with specialist input and technical support (Trémolet, 2007). In modern Greenfield PPPs, governments have generally retained the services of transaction advisors to serve as nonpublic regulators (mostly in an ad hoc fashion).
An interesting recent trend is the creation of private and nonprofit advocacy associations, specifically aimed at gaining support for the concept of PPPs in a region and taking actions that develop the local PPP market. The organizations can take both an informal and more formal or permanent forms.
A final but significant type of PPP-enabling organization is the variety of local, regional, and multinational development agencies that assist public sectors in emerging markets. These include transnational actors such as the Bretton-Woods organizations (World Bank, International Monetary Fund, African Development Bank (ADB), Inter-American Development Bank, etc.) who have been at the forefront of promoting private participation in developing countries. In addition, local development agencies in a number of developing countries play a role in supporting PPP project developments in the form of either funding or technical assistance (Viljoen, 2006).
It is clear that a variety of enabling organizations have emerged during the last two decades to help public sector organizations address the challenges faced by infrastructure PPPs. However, most of them address only a subset of the problems confronted. Thus, it appears that these organizations do not ordinarily confront these challenges in isolation but rather work together to enable and sustain PPP projects collectively. For this reason, we think understanding will be advanced by considering how these organizations function in combination, including exploring how these combinations are shaped by their institutional environments. By “institutional,” we mean the elements that create shared meanings and controls, thereby providing order to social action. These elements include regulatory and legal frameworks, norms and value systems, and cultural elements and beliefs (Scott, 1995, 2008). As mentioned above, we believe that the notion of organizational fields, as found within institutional theory, is a helpful theoretical lens.
Organizational Fields as a Theoretical Lens
DiMaggio and Powell (1983) define an organizational field as “those organizations that, in the aggregate, constitute a recognized area of institutional life: key suppliers, resource and product consumers, regulatory agencies, and other organizations that produce similar services and products” (p. 148). This is very congenial to Scott and Meyer’s (1983, 1991) concept of a “societal sector,” which includes both organizations in a given domain delivering similar service or products as well as the other organizations that “critically influence their performance,” stressing functional interrelation over geographical proximity. While DiMaggio and Powell focus on the ties (reflected in aspects of “connectedness” and structural equivalence) and mechanisms of influence operating between the organizations in a field, Scott and Meyer focus attention on the structural characteristics of the field itself and their impact on organization characteristics.
Scott et al. (2000) identify three salient components that undergird organizational fields: actors, including both types of roles for individuals and types of organizations; logics; and governance arrangements. More recently, Hoffman and Ventresca (2002) have expanded this by identifying two additional field elements: intermediary institutions and local sense-making activities. Together, these components constrain and enable action within fields and thereby shape the behavior and characteristics of organizational participants (Campbell, 2004; DiMaggio & Powell, 1983; Meyer & Rowan, 1977; Scott & Meyer, 1983, 1991). The concept of a field is an “empirical trace” (Hoffman & Ventresca, 2002) that is helpful because it defines the boundaries within which these shaping processes (such as competition, influence, coordination, and innovation) take place (DiMaggio, 1991).
The use of the field concept is of specific relevance to the present examination of PPP-enabling organizations. It provides a way to consider these organizations in combination and in interaction with their institutional contexts. In addition, the five field components mentioned above are helpful to direct our attention to salient aspects for our present comparative study of three PPP-enabling fields.
Method
Our research design is a multiple-case study (Eisenhardt, 1989) of three leading PPP-enabling fields. We chose a grounded theory–building approach due to the lack of previous work on PPP-enabling fields (Glaser & Strauss, 1967). The multiple-case approach is useful as it helps us to abstract results that are more generalizable (and therefore reliable) than those drawn from a single-case study (Taylor, Dossick, & Garvin, 2009; Yin, 2003).
Our case selection was based on the following three factors: (a) All three cases are widely recognized as leading examples of PPP-enabling fields (Cuttaree, 2007; Davies & Eustice, 2005; Farrugia et al., 2008; PPIAF, 2007); (b) the cases present a large variation in the role that the most central field actor, the PPP unit, performs; and (c) as Anglo-Saxon parliamentary democracies with roughly similar common law legal systems, these cases provide at least some control for external variance in the institutional settings, thereby enabling us to theorize (albeit preliminarily) about the implications of different field compositions. Although they do not represent the full breadth of field compositions, these cases provide a useful indication of some of the variations in the types of players and configurations that exist.
The analysis is based on semistructured interviews with leading representatives of enabling organizations in each of the case regions. We selected informants based on suggestions made by managers in the respective PPP units and then supplemented the initial interviews in a “snowball survey” approach with suggestions made by the initial informants. We conducted a total of 42 interviews with 50 informants distributed evenly between the three regions and the enabling organization types. First, we asked our informants to describe their organization’s role on a typical PPP project, citing specific project examples. Next, we asked them to identify other field actors and to indicate how they would interface with these other actors throughout the project development process. This enabled us to triangulate our findings by using multiple informants. Also, we asked them questions relating to the wider PPP program, including the guidelines and legislation that direct their work, the way that knowledge is shared among the field actors, their opinion on the effectiveness of the local PPP program (citing suggestions for improvement), and their opinion of the PPP method in general terms.
Interviews were recorded, transcribed, and then coded in a systematic iterative manner with the use of the qualitative coding software QSR Nvivo. This software is specifically useful for drawing out trends from large amounts of qualitative data (Bazeley & Richards, 2000). We supplemented our interview data with other data sources, including documents and secondary data that were either publicly available or provided by our informants, to increase the validity of our findings (Eisenhardt, 1989). More information on the informants is included in the Appendix.
Field Comparison
We start our comparative analysis of our three cases with a look at the various actors that each play a role in the enabling fields. We first consider the respective PPP units and thereafter broaden the lens to compare the other actors in each of our case fields.
PPP Units
Previous work by the PPIAF (2007) has shown how important PPP units are to the success of PPPs in a region. We propose that PPP units not only present a central type of field actor but could also be viewed as the very embodiment of governance in the field. We, therefore, first consider these most central of field actors, focusing on three subjects: (a) the structure of the unit, (b) the role it takes on PPP projects, and (c) the role that it takes in developing the wider PPP program.
British Columbia
The PPP unit in British Columbia, known as Partnerships BC (PBC), is structured as a fully publicly owned incorporated company. It is funded through user fees paid by the sponsoring departments that it assists in project development. Of our three cases, PBC takes the most central role in PPP delivery. On projects, this entails three separate functions. First, PBC is responsible for running all business case analyses to determine if projects should be delivered as PPPs. The government of British Columbia has mandated that all projects above US$50 million now need to be evaluated for PPP applicability. The business cases are presented to the PBC board for endorsement, which ultimately sends it forward to the Treasury Board for final approval. Second, PBC acts as the procurement manager once a project is approved as a PPP. This means that PBC is part of the project team, often taking the lead in developing and procuring the project (dependent on the capacity of the sponsoring department as we discuss below). PBC will also mostly engage legal and financial advisors on behalf of the sponsoring department and manage these advisors through the life of the project. A third project role that PBC sometimes takes is to act as delivery agent on behalf of the sponsoring department during the construction phase.
PBC also takes a strong role in developing the wider PPP program in British Columbia. It serves as a center of PPP excellence by developing and distributing best-practice information to governmental departments through positional papers, recommended procedures, and policy input. In addition, PBC spends a lot of time ensuring learning from project experience through actions such as lessons learnt reports and facilitating cross-project meetings. PBC also takes the lead in engaging formally (through the Pan-Canadian forum) and informally with other jurisdictions both within Canada and abroad. Finally, PBC undertakes actions aimed at building the capacity and understanding of PPPs in British Columbia, which includes (a) workshops with government officials, (b) information sessions with industry, (c) speaking at conferences, and (d) publishing information on their website. PBC attempts to address three of the four PPPs challenges: agency failures, legitimacy issues, and governmental opportunism.
Victoria
The Victorian PPP unit, “Partnerships Victoria” (PV) takes a much less central role in PPP delivery. Structured as a unit within the Commercial Division of the Victorian Department of Treasury and Finance (DTF), PV only gets involved on projects late in the business case phase, once it becomes clear that the project will go ahead as a PPP. Throughout procurement PV then acts as the interface between the project team (in the sponsoring department) and the rest of DTF. PV’s participation on projects is mostly limited to an oversight and advice-giving role, achieved via PV representatives placed within both the project team and project-steering committee. This enables PV not only to make informed recommendations to the treasurer but also to influence the decisions that are made in the project development process (specifically with an aim to achieve consistency between projects and with the PV policy and guidelines). In addition, project quality is controlled by an independent gateway review process conducted by a different unit within DTF (the Commercial Risk Management Team). Independence of the PPP program is further strengthened by the fact that the funding commitment recommendation is made by a separate unit within treasury (the commercial advisory services team).
PV does play a central role in developing the wider PPP program (similar to PBC). Program-level actions of PV include (a) facilitating knowledge sharing between projects (to increase consistency and to ensure that the project documents are best practice); (b) engaging with the private sector through activities such as conferences, individual meetings, market soundings, and even policy input sessions; and (c) in the past, taking sole responsibility for developing and keeping the exhaustive PV policy and guidelines updated. These have now been subsumed into the Federal PPP policy, 3 which falls under the jurisdiction of the Federal PPP unit, Infrastructure Australia.
Although not formally recognized as a PPP unit, we propose that another organization shares the role of PPP unit in Victoria: Major Projects Victoria (MPV). MPV is a division of the Victoria Department of Innovation, Industry, and Regional Development and focuses on providing “expert project delivery services to Victorian Government departments and other agencies engaged in the delivery of complex, technically challenging, and invariably unique projects of state significance” (MPV, 2009). In terms of PPPs, MPV, therefore, assists undercapacitated line agencies (or those unfamiliar with project delivery) in developing and delivering PPPs in their sector. MPV also supports departments with delivery of projects under more traditional delivery models. This is similar to the centralized delivery function that PBC performs in BC. In combination, PV and MPV address all four of the PPP challenges: MPV addresses agency failures, whereas PV addresses the other three challenges.
South Africa
Our final case, the South African National PPP Unit (SA PPP Unit), lies somewhere between our other two cases. The unit is nearly identical to PV in terms of structure—it is located within National Treasury and reports directly to the Minister of Finance. From its inception, the unit’s primary focus has been on project oversight (as is the case with PV), to ensure both the quality of PPPs and to protect the larger government against imprudent commitments made by sponsoring departments. The general incapacity of departments in developing and delivering PPPs (85% of our South African informants listed this as one of the key challenges in the local market) has resulted in the SA PPP unit also being forced to take a strong assistance and advisory role through both the business case and procurement phases. This generally includes sourcing the project officer (sponsoring department project leader) and advisory team on behalf of the sponsoring department. However, applicable legislation restricts project delivery accountability to reside with the sponsoring department, and therefore, the PPP unit never takes the lead on any PPP projects (in contrast to PBC).
The PPP unit also undertakes a number of actions to develop the wider PPP program. Most prominently, this entails educating governmental agents on PPP fundamentals and the PPP framework and proposing their use among governmental agents. The unit also acts as the central carrier of knowledge between projects, helping to standardize documents and project implementations. In addition, the unit has recently developed various practice notes and implementation toolkits intended to help departments understand and execute project developments. The South African PPP unit attempts to address three of the four PPPs challenges: market failures, legitimacy issues, and governmental opportunism.
Finally, it should be noted that national road PPPs (toll roads) are not overseen by the PPP unit. This is due to the National Department of Roads having set up their own unit in the form of the South African National Roads Agency Limited (SANRAL). This unit is similar to PBC in form, as it is also a government-owned corporation.
Other Field Actors
There is great similarity between the other field actors that are involved in each of our case studies. Table 1 lists the different organizations and explains the main characteristics in each of the cases. The table also highlights our findings on which of the four PPP challenges (if any) each of these organizations aims to overcome.
Summary of PPP-Enabling Field Actors
Note: PPP = public–private partnership; PBC = Partnership British Columbia; PFMA = Public Finance Management Act.
Technical advisors are very similar in all three cases and are therefore not discussed in detail.
Key Issues
Our preceding comparison of the three case fields leads us to theorize on a number of key issues of PPP-enabling fields. Our discussion includes aspects of the PPP unit, characteristics of various field actors, and typical arrangements under which they are applied on projects. In addition, we draw conclusions on the types of logics that are prevalent and the intermediary actions that are undertaken in PPP-enabling fields.
PPP Unit Structure
Our cases present two archetypes of PPP unit structures: a governmental unit (PV, MPV, and the SA PPP unit) versus a publicly owned corporation (PBC and SANRAL). The organizational form impacts a number of aspects of the operation of the PPP unit. First, a corporation is not tied to prevailing public sector remuneration scales and can therefore more easily attract and retain the highly skilled staff needed to oversee and assist with PPP development. This is underlined by the following quote by one of the founding actors who set up PBC: “You had to have a separate entity, you had to be able to pay people market rates to get them in, . . . to get the kinds of people that you need.” Second, we propose that the corporation form is less likely to be involved in activities that do not directly impact their mandate. For example, representatives of the Victorian and South African units appear to be more willing to participate in nonlocal PPP capacity building initiatives than the PBC representatives. This is underlined by this quote by a senior manager in PBC:
I actually went with the World Bank last spring. I went to a conference that they put on in [country name]. And, I mean it was a great experience, and it was really interesting to do, but it didn’t benefit our company in any way at all when you think about it. And I was gone for a week. That’s far away, you know. So, like it’s nice to do but really within our mandate, it’s difficult for us to do that.
This quote can be usefully contrasted with a quote by a senior manager in PV also in reference to nonlocal capacity building work:
We do find we get a lot a requests from particularly I guess from multilateral organizations like the World Bank Institute, Asian Development Bank, the Commonwealth Secretariat in London to provide assistance to particularly developing countries. So we’ve been trying to put together a more systematic approach to dealing with those requests, that’s sort of a developing area for us, a bit outside our core work . . . so it’s another opportunity for us to provide some more formal interaction and assistance.
A third and final impact is that the corporation form also will more generally take actions that improve its livelihood, rather than purely deliver on its mandate. This is exemplified by this quote by a senior manager in PBC of how they are trying to reposition the organization to not be susceptible for a loss of political support (through a change in government):
There is always a challenge to maintain your . . . political support . . . So we’re giving a lot of thought here to some shift of emphasis where we would be seen to be applying commercial skills to the procurement of major projects for government rather than . . . being fixated on one particular type of procurement and through that which is really what we do anyway so it’s a kind of a repositioning and, and through that perhaps we can become more neutral because there is no reason for us not be absolutely neutral.
Implementation Authority of the PPP Unit
A 2007 study by the PPIAF found that one of the main drivers of success of a PPP unit is the power of the unit or the extent to which they are able to enforce their will over the other actors in the PPP enablement field, specifically over other governmental departments (PPIAF, 2007). Our research supports this finding, as is clear from this quote by a manager in the South African PPP unit:
You know if I look also at what I would classify as successful early models, Partnerships Victoria, Partnerships UK, the common theme is the fiscal oversight. Money and the allocation of funding drives behavior, there’s absolutely no doubt about it.
This aspect is further supported by the case of MPV in Victoria: MPV has only been able to assist two sponsoring departments (the Department of Primary Industries and the Department of Innovation Industry and Regional Development) in project delivery 4 and has been unable to expand its client base to other departments. For example, we found that the Victorian Department of Education chose to employ a consulting project manager to deliver the first schools’ PPP rather than turn to MPV. This resistance to using MPV is expressed well in this quote by one of the transaction advisors interviewed:
People don’t want them [MPV] because it’s sort of saying “Well who are you anyway?” You can understand if treasury [PV] takes over, cause they own it, they gotta pay the check . . . so you can understand, you might not like it but you can understand.
Role of the PPP Unit
From the three examples, we can surmise three broad actions that PPP units take to enable PPPs in a region: (a) All units will take various functions at a program level to both develop and sustain the use of PPPs in a region; (b) in all our cases, the unit would also oversee the projects that are developed to ensure their quality and adherence to the PPP guidelines; and (c) in some cases, the unit will take the lead in developing and delivering the project. All three units investigated were heavily involved in both developing the wider PPP program and overseeing project delivery. Our three cases present a sliding scale of the PPP units taking a lead in project delivery: PBC is heavily and frequently involved in leading delivery; this task is occasionally delegated to MPV in Victoria, and the SA PPP unit does not take on this role at all.
We can theorize four implications regarding the role that the PPP unit takes on:
Having the PPP unit drive project delivery decreases the need for project delivery capacity within sponsoring departments. This approach is therefore quite useful in cases where sponsoring departments do not have historic project development and delivery skills. This is exactly the role that MPV fulfills in Victoria, becoming involved on projects where departments do not have the internal capacity to develop and deliver the projects themselves.
Having the PPP unit drive delivery might be viewed as an erosion of sponsoring department accountability. For this reason, PBC only drives the business case phase, whereas the procurement and delivery phases of projects are run by a project team that integrates both PBC and the department. PBC’s role on this team is generally limited to the financial and legal aspects (which require more specialized PPP expertise) and decreases as the project progresses through the development life cycle. The need for department accountability is even more pertinent in South Africa (as mentioned above) where it has prevented the SA PPP unit from driving project delivery.
Having the PPP unit drive project delivery and approve projects (or make approval recommendations as is the case with PBC) might also be viewed as a conflict of interest and thereby erode the legitimacy of the PPP program. For this reason, PBC takes a smaller approval role that is the case in Victoria and South Africa. Victoria has circumvented this conflict by having a separate agency (MPV) drive delivery where needed.
The drawback of having a separate delivery agent (which does not control funding approval) such as MPV is that they do not have sufficient implementation authority to convince sponsoring departments to make use of their services or adhere to their suggestions.
A further drawback of having such a separate delivery agent stems from the fact that these agents do not always have the same appreciation of the anticipated long-term service delivery outcomes (and business case benefits) on projects. In this way, their project decisions may lead to suboptimal outcomes.
Sponsoring Department Capacity
At this point, we wish to highlight the importance of capacity within the sponsoring department, specifically in the absence of a PPP unit that drives project delivery. The following quote from a local development agency representative in South Africa serves as illustration:
The project officer [sponsoring department project leader] is crucial and the overall understanding of the PPP process is critical in moving it forward progressively through the steps . . . Over and above that there is the, you know the department as well needs to have a good grasp on the project financing issues in order to have the negotiations with the private party. So these are specialized areas and unless the department have done it before it’s highly unlikely that you’re going to have a PPP expert sitting in that department that is not executing PPP’s.
Our South African and Victorian cases can be usefully contrasted in terms of sponsoring department capacity. Victoria has been able to build up significant capacity within sponsoring departments, whereas South Africa has not. In fact, our South African informants regarded the incapacity of the sponsoring department as the single most important issue in the local PPP market. This aspect accounted for no less than 38% of all references to issues that need to be addressed to improve the South African PPP program. Specifically, the role of departmental project leader, referred to as the “project officer” is viewed as critical to project success. As one of our South African legal advisors mentioned:
On the PPP that we’re advising [sponsoring department] on, the project officer’s just not there. It’s a massive massive issue. I would say that one of the key issues is the personality of a project officer. And I think the problem is that government has been significantly unable to attract good project officers.
In a number of cases, this lack of capacity has led to transaction advisors filling in this gap in an attempt to move these South African projects forward. A sponsoring department representative explains the problem as follows:
Yeah you know I worked a little bit on [sponsoring department] at a certain point and I know like in the [sponsoring department] project the advisors basically wrote the submissions to the director general of the department because the project officer there you know his job is to whatever he gets it must leave his office in 24 hours. That’s how he saw his role. So then you have advisors, you know, over stepping. And the director general takes whatever advice he gets because he is paying these people 50 million rands until he takes that little advice to the national treasury, I mean there is a big problem. So you need to also protect advisors against themselves they know a lot but there’s a point which you, if they overstep they cause a big havoc.
Therefore, in cases where the PPP unit does not drive project delivery, the capacity of sponsoring departments is of utmost importance to ensure timely project delivery. Where this is not the case, the appointed transaction advisors will often overstep their assigned role and take a leading role in developing and delivering the project. This invariably results in projects that do not meet either the sponsoring department or national treasury requirements. Failure in this respect is at least partly due to the presence of conflicting logics held by public and private actors in the PPP-enabling field (which we elaborate on below).
Project Governance Arrangements
Our investigation revealed that the way that field actors are arranged on different projects is not consistent between the three regions or even within each region. Specifically, there is great variation in the structure that the sponsoring department puts in place to execute the project. Naturally, this impacts the roles that the PPP unit and advisors play. We can identify five main arrangements from our three cases:
In-house development
In this case the project development team has been developed within the sponsoring department, with the project leader generally being a full-time employee. The project team will have a representative from the PPP unit, but they will take on a supporting role (specific application differs between regions). Examples of this type of arrangement are the Ministries of Transportation in both BC and Victoria.
Dedicated in-sourced capacity
In this arrangement, the sponsoring department has contracted in a project delivery team that works exclusively on PPP projects. The project leader will generally not be a full-time employee of the sponsoring department and can, therefore, sometimes work on projects in other agencies as well. The PPP unit will take only a supporting role on these projects. The Department of Health in Victoria is an example of this arrangement and a few health authorities in BC have also recently started moving toward this arrangement type.
Ad hoc in-sourced capacity
This arrangement entails the appointment of a project delivery agent, which will only deliver a one-off project (without the expectation of delivering other projects in future). The agent could either be sourced into the department (from another department or as a consultant) or could be an internal departmental employee who gets reassigned for the length of the PPP delivery. This arrangement has been most often used in the South African PPP field, specifically on a range of accommodation deals.
Special project company
Where projects bring together funding (and therefore representation) of a number of different governmental agencies, projects have been set up as separate public sector “companies.” This enables the project to be executed in a way that is not entrenched within one of the agencies involved. The foremost examples of this arrangement are the Canada Line project in BC and the Gautrain project in South Africa.
External delivery agent
In some cases, a dedicated delivery agency, either the PPP unit or a similar agency will take the lead in delivering the project on behalf of the sponsoring department. The sponsoring department will still have significant representation on the project team, but they will be strongly assisted by the delivery agent. The majority of health projects in BC and projects by the Department of Primary Industries in Victoria follow this arrangement.
We propose that a number of different factors shape which of the five abovementioned project arrangements will be used on a PPP project. We already mentioned two above: the mandate of the PPP unit and the capacity of the sponsoring department (broken down further as discussed above). In addition, we propose that the complexity of the project ownership and funding structure plays a role. These four factors play a role as follows:
PPP unit delivery mandate
We already discussed how the mandate of the PPP unit greatly impacts the role that sponsoring departments take on projects—specifically, in regions where the PPP unit drives project delivery, sponsoring departments will naturally tend to play a smaller role (gravitating to the “external delivery agent” arrangement identified above).
Project development history
Project development history refers to whether the sponsoring department agency that “owns” the project has historically been involved in major project delivery. Agencies with long project development histories will gravitate toward in-house development, even when the PPP unit has a mandated delivery role, as is the case with the Ministry of Transportation and Infrastructure in BC. The transportation ministries in my other two cases also present examples of long project development histories leading to in-house developments.
PPP deal flow history
PPP deal flow history is the extent to which the sponsoring department in question has delivered a number of PPP projects or foreseen to do so in future. Departments with a strong PPP deal flow history will tend to either build up in-house capacity (as is the case with transportation departments) or develop dedicated in-sourced capacity over time (as is the case with the Department of Health that delivers health projects in Victoria).
Project ownership complexity
Project ownership complexity is the extent to which the project is funded (and therefore “owned”) by more than one governmental agency or by a government agency and another partner. The complexity of multiple project ownership invariably leads to the formation of a special project company, which can both provide a unified governmental interface to private proponents and can integrate the interests of the different “owners.” In some of our Victorian cases (notably the Royal Melbourne Showgrounds Redevelopment Project and the Biosciences Research Centre), this complexity has also contributed to the appointment of an external delivery agent to ensure that the project delivery is independent of either party.
These factors are correlated to each of the arrangement types as listed in the Table 2.
Classifying the PPP Project Arrangements
Note: PPP = public–private partnership.
Institutional Logics
Projects operating under PPP arrangements entail an effort to create a partnership among types of organizations from the public, private, nonprofit, and nongovernmental organization sectors operating with quite dissimilar institutional logics (Friedland & Alford, 1991). Institutional logics “are the cognitive maps, the belief systems carried by participants in the field to guide and give meaning to their activities” (Scott et al., 2000, p. 20). In an attempt to get at the underlying logics, we asked our informants to state what they viewed as the most important advantages and disadvantages of the PPP concept. In addition, we scoured the rest of our interview data for quotations, which embody underlying field logics.
Our analysis revealed a range of different logics that exist within PPP-enabling fields: some that are shared among field actors, providing the foundation for collaboration and others that expose conflicting understandings and approaches among a diverse group of field actors.
Shared logics
Per definition, our field actors are united around the attempt to develop and deliver infrastructure PPPs. In broad terms, PPPs are founded on a “market efficiency logic” (Lounsbury, Geraci, & Waismel-Manor, 2002), which stresses the efficiencies stemming from market-based private incentives over central government control. Our analysis therefore revealed a common belief in the efficacy of private enterprise under ideal conditions. What was striking was how these explanations were presented using a consistent vocabulary, which included concepts such as “on time and on budget,” “risk transfer” (Bing, Akintoye, Edwards, & Hardcastle, 2005), and “value for money” (Grimsey & Lewis, 2005). However, it was interesting how these terms did not have a uniform meaning across the cases. The following quote by a manager in PV illustrates the transient nature of the PPP vocabulary:
You might have seen the Melbourne University and Allen Consulting research done here on the relative performance of PPPs and traditional projects, and that sort of puts the focus a bit more on, not so much for value for money savings against the PSC, but certainly a delivery on time and on budget. Which is something we’ve always advocated those advantages to PPPs but sort of been a bit in the background compared to the value for money focus. But in a sense they are some really core components of value for money, the fact that your project is going to be delivered on time and on budget. And with the global financial crisis, a lot of government stimulus spending and so on, a lot of projects being delivered to very tight timelines as well, just that certainty of delivery on time and on budget has come into more focus as one of the key value outcomes rather than necessarily a particular quantitative saving in dollar terms.
Conflicting logics
PPP-enabling fields bring together a diverse group of actors from different societal sectors. The existence of conflicting logics in these fields should therefore not surprise us. We wish to highlight two sets of conflicting logics that we believe are fundamental to understanding the dynamics of PPP-enabling fields.
The first pair of conflicting logics relates to the general approach to PPP enablement that, specifically, governmental actors take in the field. However, a logic of control stresses the need for central government control of private service provision, specifically to limit market failures associated with infrastructure provision—natural monopoly characteristics and significant externalities (Goldberg, 1976; Mody, 1996; Savas, 2000). This logic has also been the driving force behind measures to ensure control of governmental discretion, both the discretion of local government (applied through central government) and central government (applied through independent auditors and measures of transparency and accountability). A contrary logic of empowerment views the challenge of PPP sustainability as a process of increasing the ability of the players involved in the service delivery relationship. Most notably, this logic has been the driving force behind initiatives aimed at empowering public actors, but it has also led to governmental programs focused on developing the environment for private participation.
The PPP units in our three cases provide a helpful contrast of these control and enablement logics: PBC actions are steeped in an enablement logic, whereas PV and the South African PPP unit predominantly draw on a logic of control. The South Africa PPP unit illustrates an instance where these two conflicting logics come to a head, as their dual role of both regulating and driving project delivery forces them to draw on both of these logics. The internal conflict this creates is underlined by this quote by a leading South African financial advisor:
[The] national PPP unit, he’s a confused puppy cause he’s got two hats on: “Am I assisting you, am I regulating you, am I . . . ? And I don’t know where I’m sitting at what point in time and how I do this because if I advised you to do this and then I can’t say no, and you know, what do I do?” So you settle with a sort of a very complicated role.
The second set of logics that intersect in PPP-enabling fields is the fundamentally different approaches of governmental field actors versus private consultants. We term these logics a bureaucratic logic and a rational efficiency logic, respectively. In PPP-enabling fields, these two approaches come to a head most visibly in the interaction between sponsoring departments and transaction advisors. One of our South African informants, a project leader in a sponsoring department, highlighted this conflict as she explained the bridging actions that need to take place between the logics of the transaction advisors and the sponsoring department:
And get your consultants to move out of things that they don’t understand. You know it’s very easy for a consultant. We had a big issue on this thing about who signs the contract. That you will, you know ask the legal advisor and the legal advisor will say: “Well let’s just look at the documentation, it says here there’s no law anywhere.” So [informant name] just write a letter to the president and tell him, “Mr. President, public works has got nothing to do with this just give me the authority.” That is the legal advice and it’s probably correct legal advice. [But] working in government you know that protocol wise, that’s not what we do. So you need to be there in the middle to say, okay, I hear the advice, [but] in government circles we don’t do things like this.
Intermediaries
There are three ways to think about intermediaries in PPP-enabling fields. Intrafield intermediation refers to actions that bring together the different actors of the local enabling field. This would include putting sponsoring departments in touch with possible advisors or even introducing new types of organizations to an existing field. Sectoral intermediation involves actions that bridge the gap between the two sides of the PPP deal: the enabling field and the wider market of private companies that participate as proponents on PPPs in the region. Finally, regional intermediation happens when actors intermediate between the local PPP-enabling field and PPP-enabling fields in other regions. This could include sharing knowledge and bringing in international best practice from other states or provinces (in the case of Australia and Canada) and other countries.
Our analysis revealed that predominantly three organizations act as intermediaries in PPP-enabling fields: PPP units, transaction advisors, and advocacy organizations.
PPP units
We already mentioned the central role that PPP units take in the PPP-enabling field. This means that they act as intermediaries in two ways. First, PPP units are the foremost intrafield intermediaries, as they endeavor to bring together actors within the enabling field. Second, PPP units take a regional intermediary role by keeping in contact with nonlocal actors to draw in international best practices as needed.
Transaction advisors
There are two ways in which transaction advisors act as intermediaries in PPP-enabling fields. First, all the advisors we interviewed work on both the public (advisors to government in structuring projects) and private (advisors to proponents in structuring their bids) sides of PPP projects. In this way, they translate experience between these two spheres, bringing down the transaction costs. In addition, the majority of financial advisors are international accounting firms, who therefore have access to an international network of advisors who play similar roles in other regions. In this way, they are able to draw on skills and experience from other regions. Because legal principles are not as consistent between different regions, legal advisors play less of an intermediary role between different regions. The advisors we interview were for the most part much more locally focused.
Advocacy organizations
Advocacy organizations are focused on developing the market of PPPs in each region. This often requires bringing together actors from different regions and spheres. We already mentioned how these organizations are able to bring together public and private actors through sectoral intermediation. Advocacy organizations also play a role in regional intermediation, achieved primarily by hosting events such as conferences, seminars, or workshops.
These findings are summarized in Table 3.
The Main PPP Field Intermediaries
Note: PPP = public–private partnership.
Conclusion and Implications
In this study, we have investigated the emergence of a collection of diverse organizations designed to enable and govern PPP projects for infrastructure development. We have observed that these enablement and governing responsibilities are not restricted to a single governmental body but rather are shared between networks of public and nonpublic organizations. We use the concept of organizational fields as a theoretical lens to help us investigate these combinations of organizations in a comparative way. We purposely selected our cases for restricted variance and therefore observed very similar organizations (or field actors) in each of our three fields. Even so, we detected significant variation in the characteristics of these actors in our three cases fields. We showed how this variation is closely related to the role that the PPP unit takes in each field. In addition, we highlighted that even within each field, the actors are arranged in varying combinations on different projects. Our cross-case comparison was useful here to show that these combinations are at least somewhat consistent across different fields and that their use flows from four characteristics that relate to the experience of the sponsoring department, the role of the PPP unit, and the complexity of the project funding stream.
We also presented an initial discussion on the typical flied logics that guide actions in these PPP-enabling fields. Although PPP-enabling fields bring together actors around a shared logic of “market efficiency,” the divergent nature of the organizations involved lead us to also observed logics that conflict with each other. Finally, our study identified three main actor groups that play a helpful intermediary role, both between field actors and with actors outside the field.
Our findings serve to highlight the complexity of initiating PPPs in a region. The simple construction of one governmental body to oversee and execute PPP projects is clearly not sufficient to ensure the success of a wide range of projects in a region. Rather, PPPs require a combination of public, private, and nonprofit organizations that bring diverse capacities to overcome the demands of these projects on governments. In addition, they require institutional flexibility to accommodate the varying demands of different projects and to absorb the forces applied by existing institutional contexts.
The work to date is no more than an initial step toward a more complete understanding of these networks of enabling organizations. Our study is limited in two ways. First, we already mentioned the restricted variance of the cases selected. We have elsewhere (Jooste & Scott, 2011) attempted to present a fuller account of the global variation of PPP-enabling fields. More work is needed to incorporate this variation into our discussion above. A second limitation is the static nature of our assessment—as with all organizational fields, PPP-enabling fields are constantly in flux (not to imply that the rate of change is constant). In future work, we hope to explore the way in which our three fields evolved over the last 10 years and show how early formation characteristics continue to imprint the enabling field. As a final note, we suggest that more work is needed to assess how PPP-enabling field differences impact PPP success at both project and program levels.
Footnotes
Appendix
Appendix Table. Distribution of Interviewees
| Enabling organization | British Columbia | Victoria | South Africa |
|---|---|---|---|
| PPP unit | 6 | 4 | 1 |
| Sponsoring department | 3 | 6 | 4 |
| Financial advisor | 2 | 2 | 2 |
| Legal advisor | 1 | 4 | 1 |
| Other consultant | 1 | 1 | 1 |
| Auditor general | 1 | 1 | 1 |
| Advocacy organization | 1 | 1 | 1 |
| Fairness advisor | 1 | 1 | 0 |
| Development agency | 0 | 0 | 2 |
| Federal PPP unit | 1 | 0 | 0 |
| Total | 17 | 20 | 13 |
Acknowledgements
The authors are grateful for the comments of Raymond E. Levitt and the two anonymous reviewers.
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This research was supported by Stanford’s Charles Leavell Graduate Fellowship.
