For!the!Record Robert Poole, president of U.S. think tank, examines global revolution in public-private partnerships In a recent address to The Canadian Council 4. Increased accountability. Governments are for Public-Private Partnerships on May 18, 1999, more directly accountable to their customers. Robert Poole, president of the Reason Performance measures and the Request for Foundation, demonstrated his exceptional Proposal (RFP) process lead to a more precise knowledge of privatization initiatives and definition of what needs to be provided. trends from around the world. He shared his 5. Spreading ownership. P3s and initial public views on why governments need to make the offerings make government accessible to transition from being service providers to being ordinary middle-class people. The Thatcher policy makers and regulators. He contends that government “tripled the shareholders” in governments using public-private partnerships British society. The World Bank has (P3s) can increase productivity, and ultimately, recognized the benefit through growth of the will be more competitive. middle class and economic improvement. To support his view of “the global 6. De-politicization of key portions of society. revolution” in P3s, he cited some recent statistics This rests on the notion that too many from around the world. In the past 15 years, services are driven by poor politics. privatization efforts have totalled over US$900 Mr. Poole offered a brief overview of activity billion, reaching near-record levels in 1998 with in the U.S. to demonstrate areas of growth. At US$141 billion in projects. In the last five years, the federal government level, he noted, “there he believes, there has been an increase in “more has been less than you might imagine.” Reagan basic P3s” with infrastructure and utility produced only one real privatization – the sale projects topping the list. Most of these initiatives of Conrail for $1.6 billion, which has increased have been in electric utilities, water and in value five times since then. wastewater, railways, airports, turnpikes and The most progress, Mr. Poole contends, has toll roads, and postal services. been under the Clinton administration. Much of Mr. Poole believes there are six reasons for the activity has been in the power generation the increased prevalence of P3s around the market and satellite communications. The world: outsourcing of many military base functions has 1. Governments are over-extended. Just as the also been significant. Projects slated for private sector began to divest non-core privatization before the end of term include activities in the 1970’s, governments have passenger rail, the U.S. Postal Service and realized that they are involved in too many electric utilities. service areas. State and local governments are where the 2. Fiscal stress. Governments are selling bulk of the “privatization revolution” has enterprises and assets to pay down debt – begun, Mr. Poole noted. He believes that the turning net losses into net gains. U.S. is the leading country in privatization at the 3. Improved productivity. Governments have municipal level. It has moved “from primarily a realized that improving economic Republican phenomenon in small and medium performance locally will mean “gainers” for sized cities to larger urban areas with a wide the national economy. spectrum of political stripes.” The sharing of best practices, combined with more As for Canada’s prospects for P3s, Mr. Poole sophisticated techniques of costing and bidding, believes there is a lot of potential, especially in have made many municipal governments more electricity, water, wastewater and infrastructure. comfortable with the process. To put into context his views of privatization in However, Mr. Poole noted that there have Canada, Mr. Poole cited the recent Pollara been few sales of government enterprises, due survey, which found that 52 percent of the primarily to the tax-exempt status of bonds that public “strongly” or “somewhat” supported make divestiture unattractive. The Reason business delivering services. The areas of Foundation estimates that over $200 billion greatest worry (decreased quality, increased worth of municipal assets could be sold, if cost), Mr. Poole believes, “have been dealt regulatory barriers were removed. with.” He offered some highlights in sectors that When asked about “private monopolies have been especially active in privatization merely taking the place of public ones,” Mr efforts recently in the U.S. In 1998, for example, Poole responded that differentiating services is the prison industry grew by 27 percent, with the solution. In short-term contracts, there is over 132,000 beds now in private facilities competition every two years, resulting in better throughout the country. The majority of these, cost-effectiveness and service. In longer-term surprisingly, are medium to high security arrangements, Mr. Poole believes there is value 3prisons. in separating the regulatory from the delivery In water and wastewater, there are now 1,250 functions, similar to what the Thatcher operation and maintenance (O&M) contracts in government did. the U.S. They have spread beyond the Sunbelt, On the issue of mandatory outsourcing Mr. Poole noted, and have become larger and statutes, he is undecided as to their more complex. Indianapolis and Atlanta, for effectiveness. However, he does consider a instance, have seen 40 percent savings in their “political champion,” such as a mayor or water services. Mr. Poole believes that the administrative leader, a key success factor for tightening of environmental compliance P3s. He also believes that removing union regulations combined with the capital power is a successful technique. Longer-term requirements to upgrade facilities and save contracts will often allow greater flexibility in energy, have necessitated outsourcing to the meeting labour’s concerns, such as no layoff private sector. guarantees. Mr. Poole stated that airports are just at the Mr. Poole encouraged Canadian government beginning of the privatization trend. The Stuart and business leaders to “push harder and take Airport in New York was the first better advantage of the body of knowledge commercialization, with a 99-year lease won by already out there.” He believes that P3s can be National Express of the U.K. San Diego, CA and politically successful, pointing to Mayor Stephen Hartford, CT are slated for next year. Goldsmith of Indianapolis, who saw that “cities In the healthcare sector, a large number of are likely to go downhill unless they increase county hospitals have begun P3 initiatives, their competitiveness.” Mr. Poole emphasized primarily geared to low income users. The that the same is true in Canada, where Ontario Emergency Medical Services (EMS) sector has is competing with other provinces, and Toronto been characterized by what Mr. Poole calls “the is competing with other cities and its own paramedic wars,” with fire departments and suburbs. ambulance operators struggling over contracts. As for Canada’s record of two decades with He believes that the private sector has made a privatization, Mr Poole hoped that “leaders will sound case for improving efficiency in collecting take those lessons to heart.” bills and economies of scale. Mr. Poole’s speech was delivered on May 18, 1999 at the Fitness Institute in Toronto, as part of The Canadian Council for Public-Private Partnerships on-going series of breakfast events with influential business and public leaders.