Running an AOK PPP

Adele-Louise Carter BCS deputy director, Learned Society and External Relations discusses the critical success factors for running a multi-million pound PPP.

There is a wealth of information and guidance available to help one decide whether to create a public private partnership (PPP) or not, and the finances associated with this, this article covers the successful running of a PPP once the decision has been made to set one up.

So what is a PPP?

'A multi-million pound Public Private Partnership is a marriage of mutual convenience, with pre-nuptial agreements as required, between the Public Sector and a private company(ies), who have common or compatible goals, and, if the latter, respect and understand each other's goals. 

The marriage creates synergy, the relationship is for at least 10 years and both partners actively manage the risks and share in the rewards of their union. 

Each partner may realise the rewards in different ways, but the partnership will only be successful if both partners derive benefit from the relationship; these can be, for example, rate of capital employed (ROCE), customer satisfaction, value-for-money, improved employee morale, knowledge transfer or any combination of the above. 

Finally, the two partners must act together in a loyal manner to develop the customer base and its associated workload in order to achieve success.'

Given this definition, then what is required in order to ensure success? Diagram 1 illustrates the critical success factor (CSF) areas for such success. At the centre is communication, connecting all the areas which are interrelated and need permanent maintenance. 
 
PPP Diagram 

 


1. Flexible contract - this requires the setting-up of a flexible, well-structured and appropriately used contract, which allows for changing requirements. Such a contract will include the following:

a. Contract changes must be capable of being easily applied
b. The payment mechanism must be flexible to allow for requirement changes and positive and negative incentives
c. The contract needs to be well structured and unambiguous in facts
d. The contract should be shelved once written and used either for facts, as a reminder or, as support in drastic times, and not as the general rule.

Negotiation is a key requirement for drawing up and maintaining such as contract. If the contract is already defined it may require readjusting in the light of the above.

2. Clear aims - clear, compatible goals need to be established between both partners, committed to by both partners and then maintained by both partners. Compatibility is necessary so that both partners can appreciate each other's needs, respect them and then behave in a compromising fashion if required.

3. Trust - an environment of trust needs to be established, throughout the two partners. Openness of communication will assist with this as will clear joint leadership and the formation of teams where staff from each partner work together. 

Perhaps led from the top and instilled by education and structure. Joint working must not be superficial and be cooperative in spirit. A bi-directional understanding is required.

4. Conflict resolution - a workable conflict resolution procedure needs to be in place, utilized and maintained. Internal escalation processes and joint resolutions are required, prior to dispute resolution, including arbitration. 

The partner relationship should be utilized to overcome any conflicts and promote any resolutions, in order to prevent disputes. 

An exemplifier of this would be a jointly chaired joint partnering management team (JPMT) with equal representation from both partners, responsible for ensuring that issues are resolved below, or if they have to be escalated resolved at the JPMT level.

5. Positive incentives - both partners require positive incentives (not just negative incentives) as well as penalties within the contract.

The partners need to share the benefits created by the partnership in terms of financial reward (the private company could be paid extra for over performance for example) and also on a personal level for the actual staff involved within both partners could be honoured.

6. Partner relationship - a true and committed partner relationship must be developed, which underpins the contract. This relationship must be continually fostered and developed by allocating the appropriately qualified and skilled staff to the key positions within both partners.

The resultant joint team should seek agreements and resolves disagreements, and show the ability to overcome hurdles due to partnership spirit. Use of openness, trust and honesty by both partners is required and an ability to negotiate.

This needs developing within both partner organisations. Openness of communication will assist with this as will clear joint leadership, and the formation of teams where staff from each partner work together.

The staff should have a natural flair for negotiation and compromise. Any advisors (consultants, lawyers, accountants) hired need to have their contribution tied into the success of the PPP, such as their payment.

7. Address cultural issues - the cultural issues must not be ignored, underestimated or considered as detrimental, but must be used as synergy. 

The cultural aspects of the relationship must be recognised and handled appropriately. This is the crux here, once this issue has been addressed then there are different ways of handling the change, namely by organisational development or system interventions.

The structures within the partner organisations must work in harmony with each other and not create unnecessary communication chains. 

The partner relationship team must handle any conflicts created by cultural differences, and any differences should be clearly explained up and down both organisations. Should this not be easily achieved then the tension created by the differing structures must be addressed in other ways.

8. Jointly manage risk - the partners must understand, allocate appropriately and actively manage risks. Ownership should be allocated to the true owner, both if possible, but usually there in only one owner, and the inappropriate transfer of risk avoided.

All risk must then be proactively managed not just monitored and this is best done on a joint basis so that the risk is understood by both partners. 

One partner may be able to minimize the risk better than the other, but not actually be the owner. This management/ownership dilemma must be managed in a supportive way between the two partners.

9. Small successes - the small successes must be recognised as well as the big ones. For example small pieces of work or achievements within the partnership must not go by unnoticed. They might offer much bigger insights into the future of the partnership.

Quick wins could be used for positive PR purposes both internally to engender partnership spirit and externally to show the PPP in good light.

10. Address PPP interfaces - the appropriate PPP interfaces must be considered and the necessary actions taken in all current and new business. This is more than simple stakeholder analysis. PPP interfaces are those with stakeholders, customers, beneficiaries and other organisations upon which the PPP may rely.

All the CSFs affect one another to a greater or lesser degree, but some are more important at different times than others. For example, the partners need to ensure a good base contractual relationship first whereby they work as a team, then they can concentrate on working with the customer to achieve more business. 

Ensuring a healthy partner relationship is crucial to the ability to apply the conflict resolution procedures positively and allocate risks correctly. The contract also needs to be written flexibly enough to allow the relationship to work with it and not against it, and vice versa.

In order for the PPP to be continually successful, cultural complexities need to be identified and addressed throughout the life of the PPP. Then as a method to establish credibility, the publishing of small successes is vital to the development of the PPP.

The above activities may appear to lead on from each other but there is continuous feedback from one activity to another, and all activities must be continually monitored, and acted upon if they start to cause problems.

These CSFs are not in order of priority and attention to each of the specific areas will differ depending on the specifics of the PPP.

These CSFs have been constructed from researching a number of PPP style case studies, interviewing senior staff from both partners, undertaking a painstaking documentary analysis and using the techniques of participatory ethnography.

In addition, the majority of the research was what is termed 'action research', whereby,  by being a productive employee within these PPPs, the actual research causes changes in the methods applied, the mind sets of the staff and thus the future path of the PPPs. This combines theory with practice in an enlightening way.

When given the task of running a PPP, look at all the CSF areas listed above and address them to the appropriate level depending on the actual PPP in question.

Dr Adele-Louise Carter is an IT professional, being a fellow of the Society with 20 years hands on experience with a number of large IT companies, combined in parallel with a strong academic background.  Adele-louise.carter@hq.bcs.org.uk

January 2006