Category: Short term study away

Reflection by Christopher McClinton, Part-Time MBA Class of 2019

London First Impressions

Upon arriving at Heathrow a visitor to London gets the impression that he or she might there have a fully immersive international experience without leaving the airport. Some disruptions to my itinerary resulted in an unplanned and hurried dash across multiple terminals in order to catch my flight. Despite my travel anxiety, I had infrastructure on the brain and couldn’t help but marvel at the intersection of so much transport, commerce, culture, and public utility in one space. Whatever metropolis the rails leaving the airport led to seemed momentarily like a mere adornment for the real urban epicenter which was Heathrow itself. For all of the divergent opinions I would hear over the course of the next week about the efficacy of British rail and transport I was massively impressed with the Tube. Twenty‐one stops, one line change, and less than an hour later I was standing on Marylebone a block from the hotel. I would learn a lot over the next week, but among the first things I learned from Anne‐Marie (our tour guide) was that Henry VIII upon seizing the church’s land to be his personal hunting grounds unwittingly made a huge contribution to present day London’s urban planning. The park is vast and beautiful, and like Central Park in New York is a vital green space in a dense urban area. Our hotel was right next to it and all of the students appreciated that.

Learnings

The impression that the UK is a deeply divided populace ideologically speaking is the most enduring lesson learned from my trip. I think it was a remarkable experience for the GW students to be in London just months before its divorce from the EU takes effect on March 29th, 2019. In the two years since the referendum we learned that basic questions relating to borders, immigration, trade polices with the EU have yet to be resolved, yet the country is hurtling towards that deadline with unknown consequences beyond it. During our visit with Lord Knight, who seemed deeply distraught over the future of England post‐Brexit, it was pointed out that the whole question of the border with Ireland, which will remain in the EU, has not been resolved and has no practical resolution. I was struck by how many similar and sensitive issues ranging from trade to labor mobility must not have been fully contemplated at the time of the referendum. The disdain that some of our speakers had for the ‘London‐centric’, a term seemingly deployed as a pejorative, was initially surprising but echoed some of the rhetoric that is commonly heard regarding attitudes toward the ‘elites’ in our country. From my perspective, the debate between the conservative and labor party in Parliament bears much resemblance to the highly partisan debates in the US as they pertain to immigration and trade today. In some ways, the focus of much of our course (whether certain enterprises are better managed by the public or private sector) parallels the on‐going debate over Brexit. In both debates there appear to be two firmly entrenched ideological camps with Conservatives in favor of Brexit and privatization and Labour preferring to remain in the EU and generally backing nationalization policies.

While Brexit, immigration, and privatization vs. SOE debates seemed to be highly divisive topics for the country, it was my observation that there were also some countervailing forces at work that served to unify the country. Since we were in England when they were playing Colombia in the World Cup round of 16, I went to a pub to watch the people as much as the game, eager to sample the culture in what I thought would be an authentic encounter with English culture. At the Prince Regent at the corner of High Street and Nottingham I found what I was looking for and thoroughly enjoyed rooting for the ‘lads’ alongside all stripes of Londoners with the game ending in a thrilling penalty shootout. Another unifying element that I noted during my visit was the National Health Service, which was celebrating its 70th anniversary. What was interesting to me is that, while not everyone thought the system was perfect, there seemed to be a shared sense of pride about what it had made possible for the English citizens. Individuals with whom I spoke would point out its shortcomings, but I don’t recall speaking to a single person that didn’t think it was serving an important societal purpose. Another element of unity that I observed was the pride the people of London showed in the RAF, which prior to our visit had just celebrated its 100th anniversary. A final point of shared optimism seemed to arise from the recent royal wedding of Prince Harry to an American woman that seems to have found favor with the British public. These were welcome, if fleeting, elements of shared optimism in an atmosphere that has lately been marked by fear and uncertainty over what Brexit will mean for the future of the UK.

Our on‐campus analysis of the PPP model and the Special Purpose Vehicle that is formed to contract with the public sector, assemble the sub‐contractors, and deliver the service was reinforced during our meeting with Transport for London (TfL). For me personally, it was during this meeting, and specifically during the discussion with Jenny Barber and Nicola Cox, that there was a meaningful connection between the more abstract material discussed in class and real world implementation of the risk transfer and pay‐for‐value framework. In particular, it was very instructive for me to learn the detail of how the Silvertown Tunnel project was actually tendered and financed, as it was the most concrete example of PPP project financing we’ve seen. Her project also illustrated how risk transfer was accomplished by creating a revenue stream based upon an availability payment formula that ensured TfL was paying for performance, even while retaining the ability to set the fares. Further, and consistent with our readings, the financing structure for Silvertown removed the asset from TfL’s balance sheet, converting the payment stream to operational expense instead of capital expense. What remains unclear to me is how the risk is transfer is ever complete so long as the UK government is perceived to be implicitly backstopping the entire project. As Nicola noted, an SVP involved in a recent PPP with TfL miscalculated the ridership fees (due to students riding free) on which it depended for revenue, resulting in a loan default. This in turn obliged TfL to step in and guarantee and refinance the loans, suggesting that the off balance sheet exercise is not entirely off balance sheet.

After TfL, I found the meeting most relevant to our course to be the time spent with Office for Rail and Road (ORR). In our campus course we read and heard from speakers (Wooten) about the challenges of trying to replicate competition with natural monopolies. As Carl Hetherington stated, the ORR’s job is to regulate competition and rail performance. This for me was the most tangible example of the intersection of business and the state, with licensed operators and open access operators competing for rail time. I found it interesting to hear about how their NPAT (Not Primarily Abstractive Test) was used to balance competition with use of the Secretary of Treasury’s funds. Carl’s team was also extremely well prepared and generous with their time. Though her presentation was not so much related to our course topics I found Sarah Carlson to be extremely impressive and I greatly appreciated the insights she shared into the process for rating sovereign debt. I left the Moody offices thinking that outside of the Fed Open Market Committee hers was arguably one of the most influential in the world economy.

Recommendations

One of the most rewarding parts of trip for me was the opportunity to get to know the other students. For many students in the PMBA programs that juggle full‐time jobs, families, and course work there is typically little time for socializing and networking with other students. Looking back, it’s interesting to see how little interaction there was among us during the campus portion of our course. Traveling together created a completely different and more collaborative dynamic with lots of ideas exchanged on both personal and professional levels. One drawback to the tight‐knit group we became was that we may not have fully taken advantage of the chance to interact with locals. I would caution future participants about this tendency and encourage them to explore the city on their own.

The trip itinerary struck a good balance between lectures and allowing for time to experience London and its surroundings. I thought the day trips to Winchester and Cambridge were also a great addition to the itinerary. On the whole, this summer program has enriched my graduate experience at GW and I’m glad for having participated.

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.