To support super-democracy, super-security and build a thriving super-economy we to need to make substantial investments in our societies. To make those changes to our infrastructure we will have to leverage the strengths of private enterprise to help us reach our public policy objectives.
We struggle with the interface between public initiatives and private enterprise, and the debate tends to be rather crudely proposed as pitting right intention against effective action, as if they were incompatible. In fact they are mutually complimentary, and both absolutely necessary if we are to reach our goals.
We need to mix the public good with the effectiveness of the market. We need to manage strategically important assets like energy and housing, and avoid the perils of mismanagement and misdirection that so easily infiltrate incentive-weak endeavors. There is a beneficial role for public-private partnerships to partake in the management of strategic resources, so long as a clearly identified structure is followed.
The easy part is acknowledging that all sides have valid contributions to make (see the chapter Economics 001 earlier in this section). Easy, but important. There is a place for the public interest, for entrepreneurial zeal, for the efficiency of the market and for the efforts of motivated workers – all these are necessary ingredients to forge the path to our future.
The challenge is balancing the efficacy of our efforts with the efficiencies of our processes. This is where it really helps to have a firm grasp on our objectives, and clear sight of the principles. We will not get to where we want to go if we don’t leverage our talents, and we cannot tell where we will end up if we don’t decide where we are going. We need to set clear objectives, and achieve them with as much natural efficiency as we can muster.
When we look at the buildout of super-security we can see that there is much work to be done in each area. Houses need to be built and maintained, food harvested and prepared, digital communications networks laid and connected. All of these efforts will require effective public-private partnerships. The public initiative and intention to make them happen, and the private effort and ingenuity to get them done as efficiently and effectively as possible. This means we need to understand the interface between public institutions and private enterprises, and establish ground rules for their partnerships that will deliver the results we all need.
Quite often, a brief introduction to the concept of supersecurity leads people to immediately assume that it must mean the public ownership of the means of production. This is not true. In fact history has shown, time and again, that incentive is the grease that allows the wheel of production to turn effectively.
It is the mind of production that we seek to bio-mimic; left and right sides operating inside a single skull, balanced to achieve the desired objective. The private/left brain helps make the intentions of the public/right brain become reality.
The function of public policy is to determine the objective, the destination and the end result desired. In the case of supersecurity that means defining the exact nature of the services available, in terms of both cost and content. To reach the desired destination, public policy must engage the private sector to implement the services whenever possible, practical and appropriate.
In engaging with the private sector it is important that the public sector focus on three things:
- clearly specified objectives
- transparency of process
- open competition between private suppliers
If the public policy cannot provide all three of these, then engaging with the private sector is likely to fail and will be subject to corruption. In these cases the endeavour must be a wholly public effort.
Assuming the public policy is clear, transparent and open, there are three attributes of private sector participation necessary for success:
- adherence to the objective’s clearly stated quality and content standards
- responsibility for meeting the standards (i.e. risk)
- reward for taking the responsibility
Private enterprise is reliant on an incentive for effective participation, and the orientation of their risk and reward around specified objectives is necessary for their successful involvement.
This risk-reward balance necessarily includes the possibility of failure (the ultimate risk), and the inclusion of private enterprise in the fulfilling of a public objective requires the open disclosure of what will happen in the event of failure. Failure will result in costs, and even if most of those costs fall to the private partner, the public side will inevitably shoulder some of the impact, even if it is only in the form of delay. Private entities and the public must understand that the risk of additional cost exists, and the reason that those risks are acceptable is because the benefits of the partnership exceed the risks.
There are seven elements to a public initiative:
The beginning and the end are quintessentially in the public domain; the steps in the middle of the process are where private partners add the value necessary for success.
The objective is defined by the public policy. The specification of the attributes, standards and quality of the objective are substantially a public responsibility, although it is beneficial to seek input and ideas from the private sector as part of the specification process.
The design of the product or service can be developed by private parties and selected by public representatives. The private sector can, and should, build as well as maintain – those two go together, so that the responsibility for remediating defects in the construction belong to the manufacturer.
The operation of the initiative can be provided as a service by private contractors who may also assist with the management of the output, although ultimate management responsibility rests with the public entities.
Finally, ownership of the output of any public initiative belongs to the public.
By following this clear path for public-private partnerships, we can deliver the best possible results while protecting the public investment and leveraging the market. The two partners can and do work well together, when the roles and responsibilities are clearly demarcated.
So let’s see how this works in the real world by using a couple of examples raised earlier: housing and food.
The public objective is secure shelter for those in need:
- The public authority draws up a specification that includes both facilities minimums and cost maximums.
- Builders and designers submit designs for approval.
- Once a design is selected, the contract to build and maintain the housing units is put out to bid, with the winner having responsibility for construction and 20 years of maintenance.
- A public management office issues a request for bids for the operation of the housing, perhaps a one-year contract with four annual options to renew.
- The housing is owned by the public.
The public objective is nutritious sustenance, and is expressed as a specification for content and prohibited ingredients:
- Private companies submit bids for designs that meet the specification and manufacturers receive approval for their products.
- Consumers choose the products they want from the approved manufacturers and pay the market price for their product.
- The public objective is achieved, the consumer has a degree of choice that allows them to manage their diet and producers participate competitively.
In each case the producers are not public employees, and have the opportunity to reap rewards for quality products in a competitive market. It’s a win-win situation, and demonstrates that delivering super-security to our populations does not mean a state-controlled economy or a communist system.
Combining the devolution of power down to local communities, with the development of the micro-supereconomy, we will enable diverse and mutually rewarding public-private partnerships on The Path to a sustainably prosperous future.
Part 23 in the serialization of the The Path to A Future – published 2009.
A new section will be posted every 2 weeks during 2011. Enjoy!
To get a free PDF of the book go to www.standardsoflife.org/thepathtoafuture.