PPP contracts: toxic for…the private sector workforce?
Brain drain of facility managers: is the public sector doing something wrong?
It looks like Public Private Partnership (PPPs) contracts in the UK are having a bad week. After the concerning downgrading of the bond financing a PFI/PPP hospital in the Greater Manchester by rating agency Moody’s (click here to access the latest news brought to you by Decide), Scotland is the stage of new shenanigans.
NHS Lothian and its private partner in charge of the maintenance of the Edinburgh Royal Infirmary are engaged in difficult discussions pertaining to the poor performance of the services provided. According to the project’s public commissioner:
NHS Lothian said if it is successful in the dispute process, it could impose a range of measures, including retaining some elements of the unitary payment.
It is somehow reassuring to witness strong and unequivocal public management of complex contracts such as the PPPs stemming from the Private Finance Initiative investment framework set up by the British Government in 1992.
It may even be a sign of healthy project management capacities that (allegedly) lackadaisical private facility managers or service providers be reminded that these long-term contracts are based on a precise allocation of risks and rewards, which conversely can translate in financial penalties when performance targets are not reached.
However, it looks as though a more structural and concerning crisis is hitting the ecosystem of complex contractual arrangements: an unprecedented fatigue leads private sector contract managers to resign or drop off projects.
Confronted with this never-before-seen turnover in their private partners, public project owners must now look at what went wrong. Our friends at leading specialized publication Partnership Bulletin somewhat cheekily allude to it in a recent article:
It may be argued that this is simply the public sector waking up to years of relaxed management by the private sector and forcing their partners into action by belatedly demanding a high standard of compliance.
One of the major difficulties for public authorities engaged in PPPs has always been about how to garner the right contract and project management skill mix in-house. Many observers called over the years for toughened up control of the private partners. Did the public sector overdo it?
According to PPP private sector practitioners: “the attacks that the people on the ground in these contracts are facing are unbearable (…) Some managers are getting 200 emails per day just on these issues - that is not fair on a human level.
The approach is to batter people down ﬁnancially and spiritually, and then ask to do a deal that will make them go away.”
There was, until now, little interest in the difficulties that the private sector may face in terms of capacities, human resources turnover or expertise harvesting in the context of PPPs.
The irony lies precisely in the quasi-irrefragable assumption that PPPs are underpinned by the availability of hard-to-source expertise more readily found in the private sector.
But what if project and contract managers in the private sector were ready to throw the towel?
Could PPP project commissioners have triggered a fatigue crisis which their private partners suffer from? Recent testimonials must catch the infrastructure sector’s attention as the stability of contract management may be at stake, as companies organize a six-month to a year-turnover of their project managers who cannot cope with environments perceived as too toxic.
The long term risk? According to specialists interviewed by PPP bulletin: a ‘brain drain’ of talent that threatens the future ability of the public sector to manage its properties over the long term.
In an unexpected twist, it looks as though fairness and equity across PPP contracts need also to apply to private sector partners who are also health professionals entrusted with responsibilities that make them contribute to the performance of healthcare systems.