With money flooding into the economy and huge incentives to get the economy back underway, governments at federal, state and municipal levels are looking for innovative ways to get projects underway. One of the best already-established paths is the “Public-Private Partnership (PPP). That’s not to be confused with the other popular PPP acronym at the moment for the US Payroll Protection Plan.
What is a PPP?
A public-private partnership is a project which is a collaboration between one or more public sector organizations and one or more private sector companies. There has always been a great deal of controversy over the return on investment to taxpayers on the outcomes of PPPs’ but there is no question that working together can make some projects function faster.
There are numerous types of public-private partnerships. Many where the public sector will be involved in operations after the project is completed, some where both the public and private sector will share operations. Most such projects involved shared risk for the financial aspect of the project and that’s why we’re talking about them now.
Why would a PPP be more popular now?
With the impact of shutdowns due to Covid-19, governments at all levels are looking for ways to boost the economy and get people back to work. We’ve seen direct financial incentives in different places but just sending out money doesn’t guarantee it will circulate or that it will directly result in a return to employment. Public-Private partnerships are low-hanging fruit for governments to leverage money quickly into direct employment activities.
For the public sector, existing partnerships that have already been vetted and, even better, existing projects that hadn’t yet been funded but had already received approval are the fastest path to getting workers working. A project’s financing is usually guaranteed by the government and the project activated. A project like this can be activated in days or weeks rather than months and years and that’s exactly what the government wants. So the typical delays in such projects are being circumvented in a big way at the moment.
Are these projects underway already?
Oh yes. You may have seen quite a number of roadwork projects underway in the past few months. This is one reason why. The workers are working on the project. Their money circulates as rent, food, gas, clothing and other purchases and the economy turns just a little bit further on their efforts.
In our own firm, HMS, we’ve also seen numerous government funded projects activated in the past weeks in the defense, environmental and heavy construction sectors. The contractors may be sharing the financial risk with the government and their sub-contractors reap the benefits as the project gets underway.
What does this mean for project management?
Any public sector organization that is spending tax payer money needs to account for it. That’s true in virtually every country we’ve ever worked in. So, projects that were purely private sector in the past where only profit was a motive might have been managed very differently. In the private sector, for example, we’ve seen management styles where financial risk was offset to sub-contractors with highly constrained fixed-price contracts. In such a scenario, the costs to the prime contractor is always well known and the project management focuses more on quality and time rather than billing. In a public-private partnership, that won’t be enough.
PPPs have to be accountable for the money spent and that means auditable tracking of expenditures not just on how much was spent but what it was spent on. Good examples of this are often found in Defense sector contracts or R&D contracts that are partly funded by tax credits. The defense department and tax departments want to see what the budgeted plan per element of work was and how much was spent to complete that work. This is perhaps why our TimeControl product has been getting more leads than we might have expected during this economic downturn.
Is it a good time to update our project systems?
The best time, of course, would have been when your organization was first formed. The second best time would be right now. For private sector organizations who are engaging in public-private sector projects for the first time, ensuring that you are using project management systems with strong baselining functionality and then strong tracking systems to track hours, costs and progress in an auditable fashion is essential. It is a certainty that the auditing for such projects will eventually come to pass and trying to assemble auditable reports with non-auditable data could result in significant financial impacts down the road.
PPPs are they here to stay?
Not only are PPPs here to stay but I expect them to be an increasing part of large-project funding for years to come. It’s an easy and rapid method for governments to put to work the massive amounts of money they have allocated to economic improvements they are committed to.
That’s probably good news for the short and medium term for those of us in the project management software sector and those of us with project timesheet tracking tools.