Issue 20 / 28 May 2012

A PRIVATELY funded Dragon reusable spacecraft aboard a privately funded Falcon 9 rocket launched from Cape Canaveral last week and docked with the publicly funded International Space Station.

The Dragon is a potential replacement vehicle for the now-retired space shuttle.

Space travel is one of a growing number of industries using public–private partnerships (PPPs), with the health sector becoming one of the more frequent adopters.

PPPs in health are a form of procurement where private investment substitutes for public money when building public hospitals or clinics, and occasionally when providing services.

PPPs bring private investment into these projects even though they are government-owned and the core services are usually, although not invariably, provided by government.

The building is usually built sooner than if we had to wait for the money as part of the government’s budgetary cycle.

PPPs have an extensive and complex history. The Council of Australian Governments (COAG) endorsed its National Public Private Partnership Policy and Guidelines in November 2008.

There is an assumption in these detailed documents that PPPs are long-term contracts between government and the private sector “to deliver infrastructure and related services on behalf of, or in support of, government’s broader service responsibilities”. They typically include both a capital component and an ongoing service delivery component of non-core services.

The best PPP example in Australia at present is in the northern suburbs of Perth — the 500-bed Joondalup Health Campus and specialist medical centre, operated by Ramsay Health Care, providing both public and private care.

Its website describes a $393 million redevelopment “to enable us to continue to accommodate local needs [that has] already delivered a new Emergency Department, expanded Special Care Nursery with 16 neonatal cots and an upgraded Mental Health Unit with 42 beds”.

The COAG guidelines argue that the central feature of a PPP is the government purchase of a private service that is delivered within a specified time. Service quality is central to the contract. If this is inferior, not only in quality but also in cost and timeliness to that specified in the contract, the government does not pay. Government usually maintains direct control and liability for the provision of core services.

Conversations with people who have had experience with PPPs in health convey two emphases.

First, there is a massive amount of heavy lifting to be done in drawing up the initial contracts, both in writing them and reading them. The differences in values between the profit-oriented private partner and the welfare-model public provider must be described with crystal clarity and in excruciating detail.

The comprehension of both parties about what it is they are signing up to must be assayed repeatedly. Ambiguities left in contracts are like faulty tiles on a space shuttle. Later on in the flight, when the heat is on, explosions can follow. Rush leads to disaster.

Ideological glints in the eye, especially of neoliberal zealots on one hand and hungry bureaucrats on the other, indicate dangerous intoxication. Serum ideology levels should be measured before any contracts are finalised.

Second, an expert degree of “contract surveillance” and monitoring is essential throughout the life of the PPP to avoid little wobbles that turn into serious deviations from course.

Minor changes to the contracts, or minor defaults, can easily grow into huge problems. On its final voyage in 2003, engineers suspected damage to the space shuttle Columbia, but NASA managers limited the investigation. All seven crew members perished when the shuttle disintegrated on re-entry to Earth’s atmosphere.

Absolute transparency in the management of the PPP contracts is essential.

When expectations do not mesh — as has happened at Sydney’s Royal North Shore Hospital where services to be provided in a new building do not work easily in the old — problems follow.

As reported by Channel 7: “Infrashore — the consortium responsible for the $1.1 billion public private partnership running the hospital — cleaning services subcontractor ISS Health Services and [NSW] government body Health Infrastructure have been at odds over whether a significant increase in staff is needed and who should pay for it”.

So handle PPPs with care.

However much people may tut-tut about not having sufficient public money, especially capital, for public services, the fact is we don’t.

PPPs are among the less risky ways of continuing to run the services we wish to provide to the public while building new buildings. But, like with space shuttles, beware damage before the launch and the consequences of limiting investigation.

Professor Stephen Leeder is the director of the Menzies Centre for Health Policy and professor of public health and community medicine at the University of Sydney.

This article is adapted from an article first published on Stephen Leeder’s Better Health Blog.

Posted 28 May 2012

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