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Revisiting Public-Private Partnerships

Dec 30, 2008
We have written about public-private partnerships (PPPs or P3) before (see Water, Incorporated, Interstate, Inc., and Public-Private Partnerships). In the coming collapse, government on all levels will be sorely tempted to turn over public assets to private business in exchange for a fat check up front. In most cases, they will be making a serious mistake.

No state is more likely to succumb to the fat check temptation than California, and it is good to see that Los Angeles at least is aware of some of the pitfalls and is proceeding with something akin to responsible conduct. The Office of the City Controller has funded a study by The PFM Group entitled Special Study to Assess Opportunities to Develop Public-Private Partnerships (.pdf, 96 pp., 888Kb).

The study takes a stab at covering all the bases that need to be considered by a municipality when it is contemplating turning over to private enterprise an asset or service heretofore provided by the public sector. It has a clear bias toward favoring PPPs. This document is nonetheless important for anyone to read who may become involved in the near future with the questions it addresses, and that probably includes most of us who try to keep an eye on what our town, state, and federal government are up to in advancing PPPs. A section entitled “Addressing Misconceptions Regarding P3s” includes the following:

PPPs negatively impact labor. ... The concern of many labor representatives is that a P3 concession will result in lost jobs, lower wages, reduced benefits, and loss of job security. However, in many P3 arrangements, contracts have been structured such that all previous government employees are assured a job position with the same level of salary and benefits.”1 Then later, when the paper provides a case study of an existing contract for custodial services that saved L.A. County a lot of money, “the commission concluded that the savings from contracting was attributable to reduced labor costs, as contractors pay lower wages and sometimes employ fewer workers.”2

Exactly. Too often PPPs are merely ill-disguised attempts to, once again, deprive the working man and woman of a decent salary in order to put more dollars into the pockets of the bosses. In 2007, 39.8 percent of public sector workers enjoyed union membership coverage, while only 8.2 percent of private nonagricultural workers were covered.3

We are in a race to the bottom in this country, with a war on unions and an unrestricted globalization that is exporting good-paying jobs as well as doing an end run around decades of struggle for labor and environmental protections.

And let us not forget: We privatize our health care in this country, and it costs us twice what other industrialized countries pay while delivering an inferior product. Federally managed Medicare and Medicaid, on the other hand, are delivered with much greater efficiency and less cost than the health care most of the rest of us receive. Let that be a lesson to us.

Also Noted: See the Rand report, A Call to Revitalize the Engines of Government (.pdf, 28 pp., .2Mb), by Bernard D. Rostker. This call for a return to common sense concludes, “The new administration should not try to fool the American people, perpetuating the myth of smaller government by not counting the hordes of service contractors its engages. Clearly, there are things that should be contracted and that the government need not and should not undertake, but the unfettered use of contractors has skyrocketed and must be brought under control.”
1 Special Study to Assess Opportunities to Develop Public-Private Partnerships, pg. 11, accessed December 27, 2008 (as were other footnoted items in this posting)
2 Op. cit., pg. 35
3 Index of Tables: Union Membership and Coverage, from Georgia State University
tags: Governance | Labor | Business

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