Author: marielbalo

Reflection by Luke Lisell, Professional Cohort MBA Class of 2018

Reflecting on the time that I spent in London while participating in the Privatization, Nationalization, and Public Private Partnerships study abroad course, I believe that I learned a great deal. Some of my previously held beliefs were reinforced by what I heard and saw on the trip, and overall, I found that conditions in the United Kingdom were different from my expectations based on our pre-trip studies. I was also pleasantly surprised by the high caliber of my fellow participants and the broad cross-section of backgrounds that they represented.  Never at a loss for words or questions, I thought our group engaged well with each presenter and I enjoyed the Q&A sessions because I felt that we collectively drove the discussions forward with strong multi-disciplinary insights. I departed the United States expecting to hear full throated endorsements of Private Finance Initiatives (PFIs) and Public Private Partnerships (PPPs) from a series of experts engaged in fully exploiting and leveraging their possibilities. What I found instead was a pragmatic group of advisors and practitioners worried about public perception and political backlash. These individuals struggled at times to find artful ways to talk about public-private collaborations following years of negative coverage of failed projects in the national press.

As for individual presenters, I felt that Lieutenant Colonel Edward Waite-Roberts was an effective speaker and that his brief was beneficial at the beginning of the schedule. I appreciated the fact that he allocated time to give us deep background information on current British politics, Brexit, and the fallout from the Grenfell housing complex fire. I had specifically followed the international press coverage of the Grenfell tower fire last year, and incorrectly assumed that the incident was a distant memory for most members of the British public.  What Lt. Col Wait-Robert’s expert analysis made me realize was that this remains a hot button topic and generally fit the narrative, in the press and in the minds of an outraged British public, of the two opposing forces battling for supremacy in a decades-long fight in post-privatization Britain. The first of these antagonists could be called the ‘greedy private sector’ consisting of business people who cut corners to ensure higher returns and the second character being public regulators frequently found to be falling down on the job and generally doing an inadequate job protecting public interests.  I felt like this was very important context as we started our investigations into Privatization and Public Private Partnerships in the United Kingdom.

I also felt that Lord Jim Knight was a particularly interesting and effective speaker, and the luncheon at Osteria was an agreeable and appropriate setting to have a candid discussion. Lord Knight spent considerable time describing Brexit from the perspective of a senior Labour party politician, while tangentially explaining British political and educational structures that he correctly assessed to be difficult material for Americans to fully grasp. I found it fascinating that he counted the excesses of the Thatcher government and its aggressive privatization policies as the impetus for him to enter local politics in the late 1980’s. Fast forward to the early 2000’s, Lord Knight served in Tony Blair’s cabinet, as an undersecretary in the MoD during the early years of the Global War on Terror, in a Labour government with a strong track record of foreign military interventions and PFI deals. My instincts, based on US politics, would be that Lord Knight’s left-leaning Labour politics would be much less hawkish and more pro-international trade.  What instead appears to be the case is that some members of his Labour party are the voices in British society that are pushing to roll back some past PPP and PFI deals that were cut during the early days of the Blair government as well as the re-nationalization of the rail system.  This was an excellent illustration for me that local politics matter immensely for any party interested in executing long-term infrastructure or service delivery contracts with foreign governments. It is worth the effort to understand the local political environment but even that is not a bulletproof strategy as political winds may shift over time as illustrated by the current Labour government reversing some of its previous policies.

A third presentation that I felt was excellent was “Team Swansea” consisting of Labour Member of Parliament (MP) Carolyn Harris representing Swansea East and Professor Simon Brooks representing Swansea School of Management at Swansea University. MP Harris, besides being a gifted, natural orator with a profound sense of humor, did a wonderful job describing a very different corner of the United Kingdom than what we had come to expect during our tours of London and the wealthy surrounding counties. She painted a visceral picture of a post-industrial corner of Wales that was struggling to catch up after globalization shifted jobs out of the region. She and professor Brooks touched on the politics of devolution, the process designed in the late 1990’s to decentralize Great Britain’s government and give more power to the three nations which, together with England, makeup the UK. It was only after discussions with “Team Swansea” and others that I began to realize just how London centric and centrally controlled the UK governance was in the past and remains by many economic measures to this day. Wales only recently begun benefiting from the devolution policies, whereby it 1) retains greater control of tax revenues generated on its lands and 2) the locally elected Welsh Assembly appropriates those funds. Both speakers made it clear however that due to the relatively small population and industrial tax base of the country, public coiffures are insufficient to fund all the activities of local government. My impression following “Team Swansea’s” presentation was that, despite a consensus nationally that PFI’s and PPP’s had fallen out of favor among Labour party leadership, there is still a need for public private partnerships and private financing in public projects in Swansea and other similarly affected municipalities. In a chicken and egg fashion, post-industrial corners of the UK are looking for investment in public infrastructure to attract knowledge workers, entrepreneurs, and the companies that will help them climb out of the economic doldrums and begin a virtuous cycle of investment. At present however, PPPs and PFIs or versions thereof appear to be one of the few vehicles available to these rural communities that lack sufficient internal means to self-finance critical infrastructure and services.

I think that Professor David Newbery’s lecture would have been even more beneficial at an earlier position on the schedule. I thought he did an excellent job outlining the history of privatization in the United Kingdom, providing some UK specific context to the entire Privatization and Public Private Partnership discussion, and explaining the British vision of privatizing and restructuring. He carefully walked us through a case study of the network utility privatization and the structural remedies that they emplaced to create competition where feasible, and regulation to mimic competition where not. This would’ve been good context to have going into our meeting with the Office of Rail and Road (ORR). The gentlemen at ORR did a marvelous job explaining the intricacies of their job and were more than generous with their time, but the entire discussion would’ve been more effective if we had previously sat through professor Newbery’s lecture.

During our time in Winchester City, while touring the grounds of the beautiful Winchester Cathedral and the 13th century “public” school located within the constellation of outlying buildings, Lieutenant Colonel Edward Waite-Roberts said something that struck me. He commented that, “Just when you think you begin to understand this country, it will surprise you.” He was referring to the English practice of using the term “public” school to refer to the nation’s oldest, most prestigious, expensive, and exclusive learning institutions. I believe that a larger argument could be made, however regarding Britain and the United States’ understanding of each other. While the two countries appear to have very similar cultures with a long-shared history, there remains a significant gulf of understanding separating the two nations and their people. In my humble opinion, it was very helpful and beneficial to spend time touring and speaking with British advisors and practitioners of Privatization, Nationalization, and Public Private Partnerships to bridge this gap, albeit in a very specific quarter. As I mentioned in the intro, some of my previously held beliefs were reinforced by what I heard and saw, but overall, I found that conditions in the United Kingdom were quite different than what I had expected to find based on our pre-trip studies and my personal pre-formed ideas. My colleagues’ strong multi-disciplinary insights aided me immensely in breaking through some of these tricky cultural and historical distortions and ultimately, I would fully endorse this trip to any MBA student who had interest in public private collaboration.

Reflection by Alanna Williamson, MPH Class of 2019

As a health policy student with a strong interest in health care payment and delivery system reforms and cross-sector innovations designed to improve access to and quality of care while reducing costs, this course on Public Private Partnerships (PPPs) has been an invaluable addition to my graduate coursework. The perspectives shared by my classmates from the business and public policy schools were complementary to my own understanding of social funding opportunities and challenges from a public health policy lens. As one would expect, in the school of public health, my courses have focused on policy development, implementation and evaluation to achieve targeted public health outcomes. However, we do not go into as much depth about the pros and cons of various financing or organizational arrangements for social programs that have a direct impact on public health, including health care, housing, transportation, and public safety. Financing and organizational frameworks that achieve better “value for money” are of great interest to policymakers, funders, and private sector stakeholders, so it was extremely helpful to deepen my understanding of the strengths and weaknesses of public, private, and PPP organizational structures and financing arrangements from both a business and policy perspective.

Prior to visiting London, I was surprised to learn that I really had no idea what a PPP is. This term is used in the US constantly, but it is used to describe any project or program with both private and public-sector involvement. The benefit of these relationships seemed to be simply that public and private sector interests could be aligned to achieve a common goal. Through this course, I have learned that PPPs leverage private sector financing and efficiency to promote a public objective. The state can shift risk to the private sector and pay for performance based on predefined outcomes without investing a lot of up-front capital. PPPs can inject competition into a market to generate innovation and efficiency, but there are not as effective if the public sector subsidizes the program because this dilutes the incentives for private sector efficiency and competition.

I also learned that PPPs can be effective at the national, state or local level. It was interesting to hear about the UK trend toward devolution, as this mirrors the strong desire for states’ rights and autonomy in the US. In the health care sector, some of the most interesting and innovative value based payment arrangements are developing most rapidly at the state level in places like New York, California, Washington, Massachusetts and Montana. These states have the autonomy to incentivize health and wellness outcomes measures through innovative payment arrangements and delivery system reforms within the broad constraints of federal Medicaid policy. It seems that the UK has a similar urge to pass the authority to test innovative payment arrangements to more local levels of government through block grants or bundled payments in order to achieve better value for money. Since states in the US must balance their annual budgets, there may be more incentive to test PPPs at the state level in the US, particularly in business-friendly states with social problems that could be resolved in partnership with local private sector companies.

During our course in the US, we focused a lot on the opportunities of the PPP model to enhance public sector program quality and contain costs. However, there are very real downsides to this model that were made apparent on our visit to the UK. First, by fully shifting risk to the private sector, there is a real chance that operations will fail. We heard in class about a handful of examples, but in London, it did seem like this was a common occurrence. PPP contracts are written to ensure that a public service is delivered on time and on budget or the additional delay or costs are not paid for by the state. However, the failure of a private sector firm to deliver the public services promised, such as timely operation of commuter trains, ambulances, or defense, causes significant problems to the public and overall society. Simply not paying for the service if it is not delivered when needed does not seem to account for the negative effects that the disruption has on public safety, the economy, and public opinion of the privately operated public service.

While we did touch on this topic before the UK portion of the course, this point was driven home by hearing outrage from locals about the train system and my own experience of a train being cancelled. While I was refunded the full amount of my fare, this cancellation caused me to wait in the hot sun for a few hours and miss a portion of the London program. While I appreciated the financial compensation, what I really would have preferred is a reliable train that got me to London at the time scheduled. This experience led me to believe that the trains in the UK are unreliable overall, and I can understand the frustration that people would have if they rely on trains regularly. With so many failed P3s across sectors in recent years, I understood the public backlash against this model much more after being in the UK, as well as the recent reframing and focusing on infrastructure projects rather than services.

Finally, because of my interest in health policy, I spoke to many of the UK representatives and locals I met about the National Health Service (NHS). There was broad consensus from people across the political and economic spectrum that there is a need for significant reform related to financing the healthcare system to ensure sustainability and quality going forward. Some felt that increasing general taxes was the only way to go. Others focused on taxing corporations or closing tax loopholes, targeting firms like Amazon, to increase funds for the health system. A group of labor party protesters walked through the streets of Bath wishing happy birthday to the NHS and distributing pamphlets about the benefits of the system. They compared the amount of taxes being contributed to the UK health system per capita to German health care funding, stating that the UK was contributing much less and that this is the primary reason why quality is falling short. Others focused on immigration, stating that the NHS does not have the capacity to take care of all the new immigrants, and that this was the heart of the issue for them. One nurse I spoke with was convinced that the NHS would have to be dissolved, and was quite sad about it, but to her, this seemed inevitable. She said that she worked long hours and that her clinic was understaffed, but the main problem with capacity that she cited was that physicians were not compensated enough. It was interesting to hear the perspectives about funding and sustaining the national health care system in the UK, as many of the issues raised mirror the political and ideological stances of the US. However, in the UK, there seemed to be a stronger emphasis on fairness and rationality that is often missing from heated, emotional debates in the US. The concept of fairness seemed to pervade most policy discussions and it seemed like policymakers and lay people in the UK were grappling with how to solve these complex problems in a way that was fair to all citizens, including people of different income statuses and regions. Policy discussions also tended to be more forward-thinking, taking into account potential impacts on future generations. This standard for policy decision-making often seems lacking in the US where we are so often short-sighted and partisan in our policies.

In conclusion, the US and the UK are grappling with strikingly similar problems related to rising health care costs and constrained state budgets. It is useful to look to the UK for lessons learned and best practices related to PPP and other innovative funding models to improve quality and generate capital for public programs.