A Public-Private Partnership begins with a collaboration between a private entity and a governmental agency. Similar to other existing partnerships it provides a wide range of benefits and advantages to the parties involved. Although there are certain limitations that arise in Public-Private Partnerships despite their ability to compromise with each other.
The basic aspects of determining the success or failure of Public-Private Partnerships are often influenced by the engagement and the willingness of the private entity in taking a particular amount of risks. Necessary evaluation, selection, and suitability are being practiced with transparency in these Public-Private Partnerships to avoid the blurred lines being encountered.
The advantages of the collaboration of Public-Private Partnerships are not being limited to these areas:
- Opportunity for business development. It ensures that the necessary solutions than an initiative that is wholly public or wholly private are clearly stated. Each partner must ensure that it does what they are best at.
- Transfer of risk. Risks are fully appraised early on to determine project feasibility. In this sense, the private partner can serve as a check against unrealistic government promises or expectations. The balance between cost and risk for the public sector and risk and reward for the private sector is the essence of Public-Private Partnerships.
- Opportunity for a wider pool of investments. Public-Private Partnerships allow private companies to have an opening to work on major capital projects, helping them to acquire and develop experience, skills, knowledge, and abilities, which they can reapply for their organization.
- Accessible opportunities. Public-Private Partnerships allow governmental agencies to have access to finance opportunities especially when they have limited financial resources. It gives the public sector an opportunity to re-allocate its existing resources. This collaboration allows the governmental agencies to gain access to modern technology, management, and skills from the private entity.
- Realistic objectives. Private entities usually have more experience in cost containment. This allows the collaboration to fully appraise and determine the project feasibility. This also filters the unrealistic government promises or expectations.
- Higher Return of Investment. Public-Private Partnerships often generate more ROI than traditional investment opportunities. This collaboration often results in increased efficiency which reduces the operating costs. Hence, being able to focus on being redirected towards more important socioeconomic areas of the partnership.
Similar to other collaborations across the industry, Public-Private Partnerships are not limited to experiencing some drawbacks from engaging with one another.
- Inability to compromise. Just like other collaborations when Public-Private Partnerships involve risks and when one entity often expects to be compensated from shouldering the risks. This could result in an increase in costs for the public sector.
- Encountering the unforeseen. Mostly everyone shares similar sentiments when it comes to something unknown and undetermined to them and this is not limited to public-private partnerships. Since the revenue or profit of the project varies depending on the forecasted and assumes risks, the level of competition, and the complexity and scope of the project.
- Limited pool of selection. This applies to the limited population of available private entities that has the capacity in completing the project. This field makes public-private partnerships be a more strenuous activity since the fewer competition may insinuate less cost-effective collaboration. Moreover, this also applies to the suppliers where they can take advantage of this project and monopolism is likely to occur.
- Distorted views and judgment. Since Public-Private Partnerships involve governmental agencies these projects can be subjected to generate political benefits. Hence, public controversies may occur due to public beliefs that the project is acquainted with.