How the UK is leading collaboration between local government and private industry

Harnessing the power of public private partnerships

In the UK – and in fact, across the world – local governments are facing a greater tightening of purse strings in response to the public sector reform agenda, with some £18bn in cuts in the UK alone since 2010, equivalent to almost 20% of spending. Year-on-year cuts to local government budgets are set to continue, with a 6.7% cut predicted before 2020.

The picture is similar across the rest of Europe – France’s most recent budget chopped local authority budgets by €3.5bn. Spain has been strongly pressured by the EU to curb local government spending, and Italy only recently emerged from a 3-year £21bn cycle of cuts.

Delivering efficient, cost-effective and measurable services for the 21st Century has become the highest priority, and many have turned to Public Private Partnerships (PPPs) in order to meet increasing customer demand while keeping costs controlled. PPPs operate across a variety of sectors, and can take on a variety of forms.

Squeezed government budgets and increased demand

The power of UK public-private partnerships

John Major brings in legislation to enable first public private partnerships (under PFI)

The first PPP contract was signed, to design, build, finance, and operate a 1,000 bed hospital in Norwich

Almost 100 hospital projects

Over 800 schools More than 40 transport projects

300 operational projects in sectors ranging from defence and waste to leisure, culture, and housing

1991 1996 Since 2000 Since 2000 Since 2000 Since 2000

The UK developed the concept of public private partnerships (PPPs) in 1991. PPPs enable the delivery of efficient, cost-effective and measurable public services within modern facilities whilst minimising the financial risk.

Countries around the world work with UK organisations to develop their own models of PPP and deliver outstanding healthcare facilities and services. Canada, Ireland, Portugal, Australia, Japan and Sweden are all countries developing their own PPP models using UK expertise.

Partnerships mobilise the best of the private sector

Below outlines the most common structures and methods, and the extent and nature of the private involvement in each broad bracket:

Contracting out

Build | Operate | Maintain

Build | Own | Transfer

Divesture | Full Privatisation

Public Responsibility Private Responsibility

F Narrowly-defined contract work for finite projects, without any changes to infrastructure ownership, for example HMRC’s PAYE reporting rollout

F Public assets sold to the private sector, with all control and connection relinquished. Obvious UK examples include the privatisation of rail networks under companies such as Southern Rail

F Private sector builds and operates for a given contract length before transfer back to public sector (Serco refuse collection, London)

F Private sector designs and builds infrastructure, and then either continues to operate or maintain the assets upon completion of the project, as showcased by the Digitising Aberdeen campaign

Key benefits of public-private partnerships

Customer satisfaction

Reduces costs for the provider

Quick project delivery

Delivering reform

Creative solutions

Bucharest Water and Sanitation, Romania: Veolia won the “operate and maintain” bid, and Bucharest 2.2m citizens now enjoy one of the lowest water & sanitation tariffs in Europe

According to a British study, only 24% of PPPs run late, compared to 70% of public-only projects

Eolo Wind Farm, Nicaragua: 22 wind turbines brought much-needed energy to one of Central America’s least electrified countries

Ruta del Sol, Colombia: Private consortiums had to tackle three different types of terrain in building the $2.6bn highway to the capital Bogotá

Outpatient Dialysis Services, Romania: The PPP operator has invested almost €30m in upgrading and expanding facilities

Public Private

Partnerships

Top tips on building successful PPPs

F Reducing costs and expenditure?

F Extending capacity?

F Incentivise and reward providers

F Be transparent and accountability

F Working with a commercial mindset

F Collaborating to help suppliers meet their objectives

F Facilitate social cohesion?

F Create greater convenience?

F Avoid rushing

F Establish a sense of cultural fit

Be clear about your motivation for working with external partners.

Be the best client your partner has ever had.

Understand the mindset of external suppliers.

Be clear on the strategic objectives.

Invest in building the relationship.

The power of UK PPPs

Enrst & Young

Transport

TelecommunicationsOther

Social Infrastracture Power Environment

F 1146 housing and local government

relationships serving 34m customer

transactions each yearF 34 utilities relationships serving 266.8m

customer transactions each year

F Pay for bills and services across 1,500 companies from British Gas to Virgin to Xbox

F 29,000 stores across the UK 10m customers transactions each week

Local governments are under heavy budgetary constraints. By embracing innovation and entrepreneurialism over restricting service provision, local governments can use private partnerships to transform services. Since 2004, social infrastructure have accounted for the vast majority of UK Public Private Partnerships, with transport and environmental concerns also prominent in the mix.

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80

70

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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Social infrastructure is driving public private partnerships in the UK – PayPoint is at the forefront of this trend with its 1,146 partnerships with local government.

London Underground is the largest and most high-profile public private partnership of its kind anywhere in the world.

The PPP involves £37.7bn of investment over 30 years and £4.6bn of private funding.

The partnership requires the partners to maintain and enhance the performance of the underground network across:

F Availability of systems (avoidance of delays)

F Capability (average passenger journey time)

F Ambience (condition and cleanliness)

Capita have partnered with Aberdeen council to digitise and interconnect public service infrastructure.

The connectivity will provide the Council with the ability to increase bandwidth and enhance digital services to schools, leisure centres and a range of other council owned sites. shared infrastructure and services, which is lowering costs and improving connectivity across the whole public sector in Scotland. more than 4,300 sites and 5,300 circuits have been connected.

Cap Gemini partnered to help the UK tax authority make it easier for tax payers to ensure collections and payments are correct.

Employers submit salary information from a choice of over 400 suppliers or free tools provided by HMRC and Cap Gemini’s systems processes payroll data (tens of millions of transactions a month ). Analytics and business rules automate messages to employers and update debt management systems.

The partnership has made HMRC’s records more accurate, up-to-date and has reduced cases where individuals have under or overpaid tax during the year.

St Bartholomew’s (Barts) and the Royal London Hospitals in London are being redeveloped in partnership with Skanska. Annually, the hospital cares for over 700,000 people but the hospital had been under invested in for several decades.

Skanska constructed and refurbished a total floor area of 277,650 m2 and increase the number of patient beds from 1,062 to 1,248. Over 400 individuals, including clinicians, patient and community groups took part in a detailed evaluation of the redevelopment plans.

At peak, the construction workforce consisted of around 1,800 workers.

London Underground

Digitising Aberdeen

HMRC PAYE reporting

London Royal Project

UK public private partnerships in action

Localising the PPP model: PayPoint launches cash-out voucher scheme for local governmentChallenges:F Staff needed an efficient way to assess legitimacy of claims for £100 crisis vouchers, processed through

one system.F Once the claim is deemed legitimate, the staff needed to find a way to distribute the voucher to the

claimant.F The 2012 budget ultimately reduced available local council budgets and “emergency payments” were

devolved to local governments, inflating running costs.

Solution:F PayPoint created and distributed a portal for 22 local authorities in April 2013. By July, the number had

increased to over 50. The quickest voucher redemption was just 45 seconds after being issued.

Control placed in authorities’ hands

Accountability and visibility through technology

Internal transparency, authorities able to run reports on staff

Ease of voucher use: can be redeemed at any one of the UK’s 29,000 PayPoint stores

Localising the PPP model: PayPoint works with Citibank to replace giro chequing systems

Challenges:F There are 1.5m Britons currently without access to a bank account, a demographic that disproportionately receives

government benefits such as pensions and child maintenance.F The cost of remaining unbanked as an individual is an estimated £1,300/year.F Local government required a simple and cost-efficient way of delivering benefits payments, replacing outdated old

Giro cheques.

Solution:F PayPoint implemented the Simple Payment service in partnership with Citibank, streamlining the payments

process and delivering cost-cutting for local government.

Benefits:

Payments available at over 10,000 PayPoint outlets from Land’s End to John O’Groats

£15m estimated savings for local governments, taking on administration and infrastructure responsibilities

871k transactions a year dispensing £167.6m to customers

Public-private partnerships in Europe

A multinational consortium partnered with the Portuguese state to build and manage an upgraded 167km highway on the west coast, servicing between 9,000 and 12,000 vehicles daily, for

a cost of €250m

The UK Department for Transport, London & Continental Railways, Rail Link Engineering, and Network Rail delivered the Channel Tunnel project on time and within budget in September 2003

A consortium led by IBM collaborated with the German Health Ministry on the bIT4health initiative (better IT for better health), provided electronic patient cards for 80m individuals.

HPC Ukraina was awarded a contract to expand the capacity of Container Terminal Odessa (CTO), adding 700,000 to the existing 2,250,000 TEU

capacity

Austrian renewable energy company RP-Global developed a $92m Wind Farm, boosting Croatia’s wind power supply by 34%.

Public private partnerships: Utilities Public-private partnerships across the world

Recurring episodes of conflict Leaks in the water distribution network

Recurring episodes of conflict and a challenging political-economy in North Lebanon contributed to serious power shortages in the country.

The Government partnered with Butec Utility Services upgrade, maintain, and operate the electricity distribution network.

Leaks in the water distribution network of Bucharest meant water losses were nearly 50% and costs were unmanageable.

The government partnered with Veolia to upgrade and service the system, providing Bucharest’s 2.2 million population one of the lowest water and sanitation tariffs in Europe.

OutcomesF 100% of water samples taken now meet E.U.

quality standards

F Customer satisfaction increased from 46% to 75%

F Water consumption decreased from 516 to 239 litres per person per day

OutcomesF 350,000 households enjoy higher quality

power services

F Encourages foreign investment in Lebanon

F Decreases government losses

Public private partnerships: Healthcare & educationPublic-private partnerships across the world

Moldova’s health care system

Moldova’s health care system suffered from outdated equipment.

The government partnered with Magnific to renovate, construct, equip and operate a new diagnostics centre.Which benefits over 100,000 people annually.

Belo Horizonte in Brazil

Belo Horizonte in Brazil, has made early education a priority and partnered with Odebrecht to construct primary schools and preschool facilities as well as delivering nonpedagogical services, such as maintenance and security.

The partnership expands access to early education in the city by 18,000.

OutcomesF The hospital can diagnose over 100,000 pa-

tients annually

F Five per cent of annual revenues is returned to the Hospital

F The PPP mobilized $7 million in private sec-tor investment

OutcomesF More cost effective construction and opera-

tion of 37 new schools

F 18,000 low-income children attending school

F Mobilizes $95 million in private sector in-vestment

Public private partnerships: Tourism & transportPublic-private partnerships across the world

Jamaica’s government

Jamaica’s government were subsidising Jamaica Air which was costly and inefficient.

The government partnered with Caribbean Airlines to privatise air Jamaica. 900,000 passengers benefit from the new service, and the government eliminated their subsidy.

The government of Sierra Leone

The government of Sierra Leone has been struggling to recover from a devastating civil war in the 1990s.

Wanting to develop it’s tourism industry, the government partnered with Hilton Hotels to redevelop and manage a 200-room hotel in Freetown.

OutcomesF The hotel is expected to attract 40,000 visi-

tors annually

F The Hotel employs 400 people

F The project will attract $40 million in foreign direct investment

OutcomesF Helping stabilize Jamaica’s public finances

F 900,000 passengers benefit from the new service

F Jamaica secures improved public services

PayPoint keeps modern life moving throughout the uk

Energy Water Media, inc. BBC TVL

Housing and Local Government

Transport Mobile E-money

34 clients since 1996 serving

266.8m customers

16 clients since 2003 serving 13.2m

customers a year

10 clients since 2001 serving 23m

customers a year

146 clients since 2006 serving 34m

customers a year

22 clients since 2003 serving 4m

customers a year

32 clients since 2001 serving 9.4m customers

a year

16 clients since 2008 serving 7m

customers a year

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