The transformational and transactional PPP challenge

In pursuing Public-Private Partnerships (PPPs), must the orientation and approach be transformational or transactional? Are PPP arrangements simply about specific transactions and projects? What is the transformative value and aspect of PPPs? What is the proper orientation towards PPPs?

PPPs are transformational. PPPs must be viewed as a strategy that is geared towards change. Better quality of life for Filipinos, inclusive growth felt and enjoyed even by the poorest sectors of society and general welfare beyond rhetoric is the core and end of PPPs. These are the deep and real changes that propel and anchor PPPs.

The Department of Interior and Local Government (DILG) has openly embraced this concept. In Memorandum Circular No. 120 (MC) dated September 7, 2016, the DILG has made it clear that PPP is for a purpose, and this purpose is the people. DILG encourages local government units (LGUs) to pursue P4 or PPP for the People.

The MC and the accompanying PPP template ordinance define PPP, at the policy level, as “a developmental, innovative, change and partnership strategy aimed at promoting the general welfare, inclusive growth and better quality of life of Filipinos.” PPPs should never be implemented if it will not result in development both at the personal, community and societal levels.

The draft PPP guidelines being considered by the National Housing Authority also speaks of the noble objective of PPPs. Its version of P4, as suggested by this columnist, shall be referred to as PPP for Progress.

PPPs are transactional. The typical definition of PPPs refers to specific projects, contracts or transactions. The National Economic and Development Authority describes a PPP as “a contractual arrangement between the government and the private sector to deliver public infrastructure and/or public services.”

On the part of the PPP Center, PPP is “a contractual agreement between the government and a private firm targeted towards financing, designing, implementing and operating infrastructure facilities and services that were traditionally provided by the public sector.”

In the MC, P4, at the project level, is “a contractual arrangement between the LGU and the project proponent to deliver public infrastructure and/or public services where each party assumes specified functions, bears certain risks, provides contribution, performs particular obligations, and earns benefits and revenues.”

For every project, depending on the modality, applicable law or regulation, contribution or participation of parties, and risks involved, the requirements may vary. Regulatory approvals may also be different. Build-operate-transfer, joint venture, lease, divestment and corporatization arrangements are governed by five different laws and regulations.

PPPs are both transformational and transactional. PPPs are neither pure transformational nor transactional approaches. They are both. The parties and stakeholders must not lose sight of the desired outcome. At the same time, particular transactional requirements must be observed. A PPP cannot serve the interest of the people if it will violate the law. On the other hand, a PPP project, while compliant with all legal, technical and financial prescriptions, must redound to the benefit of the consumers and the people.

Both are indispensable. PPPs should be structured and advanced this way.