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Privatization in the city : successes, failures, lessons.
- Conceptualizing Corruption in Public Private Partnerships
- Privatization and public-private partnerships
- [E S Savas] Privatization and Public-Private Partn(BookFi)-2
Show all documents Public Private Partnership and Higher Education System in India: An Economic Analysis Abstracts: India is a land of education; it is most effective instrument to mould the responses of the agents of production for a common goal. It can generate potent forces helpful in the transformation of a traditional society.
This article conceptualizes the vulnerability of the different stages of Public-Private Partnership PPP models for corruption against the backdrop of contract theory, principal-agent theory and transaction cost economics, and discusses potential control mechanisms. Second, as these PPPs are used not only in developed countries whose legal order may shield them sufficiently, but also in developing countries, carving out the vulnerable points in PPP arrangements may enable decision makers to install appropriate control mechanisms, if need be on project level. Nonetheless, as every kind of private sector participation, PPPs are instruments that pose challenges on the public administration Farazmand , These cooperation models, being very different in design and form, in general have to balance between the managerial autonomy of the private partner and democratic accountability of the public body involved.
Conceptualizing Corruption in Public Private Partnerships
This article conceptualizes the vulnerability of the different stages of Public-Private Partnership PPP models for corruption against the backdrop of contract theory, principal-agent theory and transaction cost economics, and discusses potential control mechanisms. Second, as these PPPs are used not only in developed countries whose legal order may shield them sufficiently, but also in developing countries, carving out the vulnerable points in PPP arrangements may enable decision makers to install appropriate control mechanisms, if need be on project level.
Nonetheless, as every kind of private sector participation, PPPs are instruments that pose challenges on the public administration Farazmand , These cooperation models, being very different in design and form, in general have to balance between the managerial autonomy of the private partner and democratic accountability of the public body involved.
They therewith epitomize the fact that the cutting lines between the public and private sphere are blurring and have to be re-evaluated. Overall, PPPs are designed to raise potentials for a — quantitative and qualitative — improvement of public services due to enhanced financial, managerial or technical efficiency Klitgaard ; Kwak et al. This promise as well as optimism from PPP advocates in many cases did not fully realize. The reasons can be endogeneous to the design of a single project, or more general exogeneous factors in the execution process of PPPs for examples e.
Hodge and Greve Several weaknesses could be mentioned here, as e. Even if the process of PPP implementation and execution seems to be comparable to agreements on other forms of shared responsibilities between the public and the private sector, there are relevant differences, in particular regarding contract duration and design as well as the composition of actors involved.
These characteristics of PPPs may make them also particularly vulnerable to corruption, even if a fair amount of literature refers to the general control-effect of private sector inclusion e. Sclar Hence, this article conceptualizes from a theoretical viewpoint the vulnerability of PPP models for governance problems stemming from unethical behavior and corruption against the backdrop of contract theory, principal-agent theory and transaction cost economics.
Second, tackling the question of the origins of unethical behavior and corruption in PPPs is all the more relevant as these instruments are used not only in developed countries whose legal order may shield PPPs sufficiently against corruption, but also in developing countries and emerging markets that do not provide these legal instruments. Hence, carving out the vulnerable points in PPP arrangements may not only rise awareness regarding this problem, but also may enable decision makers to install appropriate control mechanisms, if need be on project level.
Budgetary restraints and the pressure on public goods, particularly on existing network infrastructures led to a redefinition of the private and the public sphere and responsibilities in many countries. Private sector inclusion is discussed as a potential solution for the altering challenges of the public sector. This inclusion can take place in different guises — as full or partial privatization, or as joint projects in the form of public private partnerships PPPs between the public administration and private firms that ensure adequate control rights for the public sector over the crucial aspects of service provision Demuijnck and Ngnodjom ; Marques and Berg Generally spoken, the implicit assumption of a better value for money in PPPs is derived from the neo-classical view of markets under perfect information, even if empirical evidence for their superior performance remains limited Hodge and Greve ; Reeves Hierarchy is replaced, and only a limited delegation of authority between the partners is given, raising questions regarding accountability Behn ; Koenig-Archibugi These characteristics constitute a relevant distinction against other contractual arrangements see e.
Savas Hence, the prevalent PPP definitions typically focus either on the players involved or on procedural aspects of these partnerships Bloomfield ; Grimsey and Lewis ; Marques and Berg ; Hodge and Greve Based on these theoretical approaches, PPPs in the sense of the presented study are contractual agreements between at least one private enterprise and the public sector that comprise more than one value-added step or level — i.
Moreover some control rights remain with the public partner, while the private company enjoys some leeway to generate cash flow. Consequently, a complete material privatization cannot be classified as PPP.
The duration of PPP projects varies between one and thirty years, with mere service and management contracts being of relatively short-term duration, while PPP designs which include the construction of an asset and that are refinanced by user fees are usually based on longer contract durations.
In particular, long-term PPPs, which may involve several generations of civil servants, but also private managers and citizens, receive specific attention, as the concept of action and liability may be affected in these cases Bloomfield The commercial risk of failure is mainly borne by the public sector in short-term projects that do not affect the ownership of the asset which remains with the public sector.
This is caused by potentially insufficient revenues relative to its costs high upfront costs must be refinanced over extended periods of time , while protection mechanisms designed to reduce the commercial risk to the private company by guaranteeing a fixed or minimum revenue stream are not always in place.
Generally, the number of contingencies regulated by the respective contract differs amongst countries and sectors, respectively Iossa and Martimort Hence, even if the commercial risk can be fixed in the contract, in particular in developing countries proper enforcement mechanisms are often missing, or the inclusion of such clauses depends on the bargaining power of the private firm that may be limited.
Overall, issues as risk allocation, risk management and, consequently, renegotiations, are the main impediments to the successful use of PPPs see Carbonara and Pellegrino ; Pellegrino et al. The expectations and interest — as well as the incentives — related to the socio-economic outcomes of PPPs differ substantially among participants and stakeholders.
Nonetheless, valuing PPPs as cooperations does not cannibalize their contractual nature that is based on different interest. The public partner focuses on its need to procure additional capital as well as to attract managerial competences and technical skills — which are of special relevance in the case of technologically complex infrastructures like water supply, sewage systems, energy, and telecommunications — without losing the political control over infrastructure provision.
Even if the evidence of higher efficiency in the private sector is not unquestioned in literature, in fact the private company may be more accountable to its customers and to the public partner due to the existence of a contract that defines duties and potential penalties, and the service delivery is expected to be better Marques and Berg Additionally, as many forms of PPPs allow the financing of the public infrastructure as off -budget or off -balance-sheet, at least the public perception is given that these models avoid new debt Bloomfield ; European PPP Expertise Center EPEC This fact may be more relevant for the political level that decides whether PPPs are principally an option of service provision, less important for the administration.
As for the administrative level, the expectations regarding to the implementation of PPPs may differ. Beyond the expected benefits — which in the long term also may enlarge the leeway of the administration in the sense of Niskanen — there are at least short-term restrictions or inconveniences arising from PPPs. The administrative level has to cope with new prospective partners, most likely new legal regulations for tendering the PPP, and possibly the public that has a stake in the respective project.
An increased workload or the necessity of further training may be the consequence — in particular for smaller administrative bodies a challenge that is not easy to manage. The implicit assumption that the public partner may have a homogeneous interest therefore has to be questioned. In contrast, the private company is driven by profit motives Reeves In addition to maximizing its profit in the specific projects at stake, the private partner typically pursues a long-term, strategic goal, too: experience and expertise in one country as a PPP partner may increase the likelihood of winning future tenders for similar PPP projects in other contexts, which is of interest in particular for multinational enterprises.
Caiden and Caiden This fact is even more relevant as — in the context of the economic theory of new institutional economics— in all cases of assigned power some kind of principal-agent-relationship exists. A principal, who delegates power, and an agent, who wields that power, but whose actions cannot be supervised by the principal, characterize such a situation. This is true even though not all kinds of violations of obligations that occur due to principal-agent-problems can be characterized as being unethical or corruption.
The implicit assumption is that there is a societal consent regarding the acceptable set of actions, and a clear-cut understanding of where misuse of authority or assigned power starts Caiden and Caiden This definition covers a broad range of actions, independent from the question if, or if not, the individual act is liable to prosecution in a specific context.
This broad approach is necessary as the legislation as well as the general attitude towards corruption differs substantially across countries: while in most countries worldwide bribery is illegal, prosecution schemes differ, and so does the perception of unethical behavior. Hence, even if a specific act — e. Accordingly, also non-criminal actions can be understood as corruption in the sense of this study, as long as they lead to unfavorable outcomes in terms of inefficient allocation of bids, inefficient service delivery or increased cost levels for the public sector.
Moreover, these practices often can occur as network corruption in the sense that a relatively closed social network benefits from the corrupt practice, not only a single individual.
Here, often a time lag exists between the corrupt practice and the benefit from it: The investment occurs at t 1 , while the return on investment RoI occurs in t 1 or t 2 or even later Priddat Based on insights from principal-agent theory and contract theory the vulnerability for unethical behavior in PPPs can be grounded on three characteristics: the very incomplete and somewhat discretionarily decided contract with high transaction costs they are based on, the multi-level characteristics of implementation and execution, as well as the underlying multi-step or life-cycle concept.
This vulnerability may realize in different specific channels for unethical behavior and render them more to this behavior than other contractual agreements or collaborations between the private and the public sector Hemming ; Iossa and Martimort ; Klitgaard Incentives as well as possibilities to behave like this are induced by these characteristics.
Assuming that individuals have no implicit preference towards more or less ethical behavior, their decision will depend on the incentive in a specific situation and the expected costs — including transaction costs — and benefits from their decision.
The underlying assumption is that the private side has an incentive to bribe the public servant not vice versa. While the decision to implement a partnership with the private sector is a political one pre-tender decision , the tendering and execution process itself is guided by the administrative level ex ante as well as ex post to the project execution.
Hence, one can assume that in most cases the receptor side for corruption will be on the public side: The political level may be the subject of bribery in the pre-tendering phase, with enterprises trying to influence politicians to open up sectors for PPPs, or more concretely, to turn a single project into a PPP.
The administrative level will be the target whenever a private enterprise strives for becoming part of a newly established PPP, as the public administration allocates the right which is often a monopoly of serving the market. The same applies to corruption in the execution phase of the project or after completion in the context of re-negotiations or contract renewal. For the briber, the private enterprise, the revenue stems from the cash flow of the project — may it be the direct payment by the public sector, user fees, or a mixed approach.
The costs of the PPP include not only the implementation or service costs depending on the PPP type , but also transaction costs and the costs of paying the bribe, as well as additional costs from the discovery of corruption punishment costs, e. The incentive for corruption is given when the revenues outperform the costs. Hence, corruption is likely when under corruption the cash flow from the project is higher or the implementation- or service costs may be lower e.
For the politician as well as public servant, the decision to become corrupt can be modelled similarly. The revenue stream as well as the costs related to corruption are endogenous to the respective project, even if they may differ substantially amongst projects, depending on the PPP-type, the specific contract design as well as the financial size of the project, while the probability of being caught is exogenous to the specific project.
Table one summarizes the characteristics of PPPs that may be relevant in the context of unethical behavior and corruption and are directly related to the multi-level characteristics of implementation and execution, the somewhat discretionarily decided incomplete contract they are based on, as well as the inherent multi-step or life-cycle concept Table 1.
PPPs typically emerge in a context of incomplete information and uncertainty, contracts will — necessarily — be incomplete Parker and Hartley Even if contingent clauses can be applied, their use imposes requirements — possibly realized events have to be anticipated, described and verified — that are not easy to fulfil Iossa and Martimort Transaction costs therefore are all costs which occur in the context of contract formation, monitoring or enforcement, including information costs and the costs of the creation of institutions necessary for contract supervision Blum et al.
These costs, arising from the incompleteness of the contract, increase the total costs of the deal. Erlei et al. The exploitation of information asymmetry can also be categorized as opportunistic behavior — with the danger of opportunism increasing with asset specificity Reeves As a consequence, and knowing that any service interruption will result in additional problems, the incentive to make concessions can be assumed to be higher than in other contractual arrangements.
In addition, through upstream-corruption potential problems in the future can be smoothened — a fact which also becomes relevant if the tender process itself was completed without corruption, as for future projects, contract renewals or re-negotiations the RoI may be high enough. Even if many scientific studies tackle the pre-level, the political decision in favor of a PPP, or the level ex ante to the implementation of the PPP, the tender process itself, the post-tender stage has been widely ignored so far, as well as the potential problems arising from the PPP-inherent multi-level characteristics Iossa and Martimort At the first, the pre-decision level, politicians decide to turn a specific infrastructure project into a PPP.
As evidence demonstrates that in general corruption may lead to misallocation of resources, e. Caused by the multi-level characteristics of PPPs, even if the respective political decision has been successfully influenced in favor of the PPP-alternative, there is no certainty that the enterprise itself will be the private partner in the project. Sclar ; Savas As for all kinds of PPPs, the tender process is of pivotal relevance, with being quite similar to more general forms of public procurement and therefore extensively covered by literature, e.
Sclar ; Savas ; Iossa and Martimort As delineated above, in the ex ante and ex post stage, the administration is the decision-maker, implementing and managing PPPs, and consequently the second stage with regard to corruption. In most countries, e. While this fact diminishes to a certain degree the implicit idea of innovation in PPPs, which should not be affected by a large number of regulations, on first sight it may also shield partnerships against unethical behavior Bloomfield Per se there is no chance to bypass existing public procurement laws with the implementation of a PPP, at least in more developed countries.
This also is the case for unsolicited offers by private companies without a prior tender process see for details Hodges and Dellacha Accordingly, the selection of the private partner is most of the time the endpoint of a two-tier decision-making process. Within this process, a competition for the market, private companies make their bids to win the contract. For all enterprises that are involved in public procurement contracts in general, this stage of the decision-making process is of pivotal interest, as it is characterized by both — high risk and substantial cost drivers — while the outcome still remains insecure.
The search for tender information, specific information about the planned project, the preparation of the offer itself, and the provision of sufficient proofs of suitability are relevant for success in the bidding process, but costly.
Payments for insider information or an inclusion in the list of pre-qualified bidders may pay off here, as well as to influence the structure of the bidding specifications so that the enterprise is the only qualified supplier Cobarzan and Hamlin
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Privatization and public-private partnerships
Many view this trend with alarm and see it as a danger to democracy. The rallying cry of the Reagan Revolution was ''Get government off our backs and out of our pockets," while in Thatcherite Britain it was "Rolling back the frontiers of the state. As more of people's earnings are taken by government, as decisions about the disposition of these moneys are made by increasingly distant and unresponsive organs of government, and as government's presence pervades more areas of human activity, freedom and liberty are being lost.
The concept of public private partnerships PPPs has attracted worldwide attention and acquired a new resonance in the context of developing countries. PPPs are increasingly heralded as an innovative policy tool for remedying the lack of dynamism in traditional public service delivery. However PPPs have also become mired in a muddle of conceptual ambiguities. This paper sheds light on the PPP concept and the rationale for invoking private participation in developing countries.
This paper aims to define Public Private Partnerships PPPs that are considered as a major approach in delivering public infrastructure projects in recent years.
[E S Savas] Privatization and Public-Private Partn(BookFi)-2
Он по-прежнему смотрел вниз, словно впав в транс и не отдавая себе отчета в происходящем. Сьюзан проследила за его взглядом, прижавшись к поручню. Сначала она не увидела ничего, кроме облаков пара. Но потом поняла, куда смотрел коммандер: на человеческую фигуру шестью этажами ниже, которая то и дело возникала в разрывах пара. Вот она показалась опять, с нелепо скрюченными конечностями. В девяноста футах внизу, распростертый на острых лопастях главного генератора, лежал Фил Чатрукьян. Тело его обгорело и почернело.
Она бежала короткими испуганными прыжками, волоча по кафельному полу туристскую сумку. Беккер хотел подняться на ноги, но у него не было на это сил. Ослепленные глаза горели огнем. Он хотел крикнуть, но в легких не было воздуха, с губ срывалось лишь невнятное мычание. - Нет! - закашлявшись, исторгнул он из груди.
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Машина была оплачена человеком в очках в тонкой металлической оправе, и он должен был его дождаться. Беккер оглянулся и, увидев, как Халохот бежит по залу аэропорта с пистолетом в руке, бросил взгляд на свою стоящую на тротуаре веспу. Я погиб. Халохот вырвался из вращающейся двери в тот момент, когда Беккер попытался завести мотоцикл. Убийца улыбнулся и начал поднимать пистолет.
Похоже, он и на сей раз добьется своей цели. Ключ совсем. Танкадо мертв.