Public Accountability in Public-Private Partnerships
by Nick Schwellenbach, 2/3/2014
The nonprofit group In The Public Interest (ITPI) released a white paper last week outlining what state and local governments should do when considering using public-private partnerships for infrastructure projects like roads. For anyone interested in maintaining democratic control of public structures as well as getting a good deal for the public, ITPI’s paper is a great starting point for designing and modifying laws and policies to achieve those goals.
As of last year, 33 states and Puerto Rico had laws on the books that allow for these partnerships. More may be forthcoming.
And the interest in infrastructure is real. The New York Times reported today that many states are considering expanding their investments in infrastructure due to improved revenue. “With huge pressure to deal with some of these infrastructure issues, I think you will see that getting more attention in the coming months,” Scott D. Pattison of the National Association of State Budget Officers told the Times. Yet despite the increasing availability of public financing, many states and local governments will still likely look to partner with the private sector and are looking at states like Virginia. But as National Journal warned in a piece last year on Virginia’s partnerships, ultimately they “may just be a way of forcing drivers to pay more in the long run.”
The true costs to the public of privatization are often not considered until it’s too late. As Ellen Dannin explained in an analysis of Chicago’s privatization of parking meters on Truthout last week, “Important costs caused by infrastructure privatization are easily overlooked, because of the length of the contracts, their impenetrable language and the need to think through how the contract terms would affect people, communities, investors and budgets. Not recognizing these as costs makes privatization more likely.”
ITPI offers several detailed recommendations for laws that enable public-private partnerships that would:
- Require robust transparency in the process from the front-end phase of planning and bidding and throughout the life of a project;
- Ensure infrastructure projects truly reflect public priorities and “aren’t driven only by the opportunity for and magnitude of private investment returns”;
- Assess whether it even makes sense to leverage a private-sector partnership over more traditional public finance, possibly by analyzing the project through a “Value for Money” analysis that broadly and appropriately considers a number of variables, including public interest goals, “to determine if the benefits merit the higher cost of private financing”;
- Maintain broad and equitable public access to infrastructure by controlling how much for-profit companies can charge in user fees, such as tolls;
- Ensure that for-profit companies invest in the communities they are profiting from by hiring workers from the area, paying living wages and benefits, training workers, and hiring displaced public-sector workers;
- Require public interest contract provisions that don’t “insulate the private entity from necessary levels of risk at the expense of the public.” This includes prohibiting non-compete clauses (which tie the hands of government in doing improvements around the privatized infrastructure); incorporating term limits on how long the contracts can last; requiring adherence to quality, labor, and other standards; explicit expectations of regular public oversight and rights and protections for the public; and subjecting the project to the same laws that traditional public projects face.
For more details, check out “Infrastructure Justice: Building Equity into Infrastructure Financing,” by In The Public Interest.