By Steve Kelman

Blog archive

The Lectern: Public/private partnerships old and new

Australia (and the U.K.) is the world's leader in so-called public/private partnerships (often known in the U.K. as the "private finance initiative"), a technical term for procurement arrangements where a private organization builds, maintains and (sometimes) operates public facilities such as roads, hospitals or airports for a fixed period of time, often 25 to 30 years. Payment often occurs as an annual payment from government, sometimes as user charges (e.g. road tolls) the facility receives. Indeed, Australia's Macquarie Bank is the world's leader in organizing these ventures; an entity that owns various Macquarie public/private partnership contracts is listed on the New York Stock Exchange. Visiting the historic parliament building for New South Wales (the Australian state where Sydney is located), one of Sydney's oldest buildings, I learned that the structure, originally part of Sydney's first hospital complex, was an early, if perhaps a bit sketchy, example -- from the l820s! -- of a public/private partnership. The British parliament refused to appropriate funds to build a hospital in Sydney, then mostly a prison colony. So Governor Macquarie -- ironically! -- came up with the idea of bidding out a government-sanctioned rum importation monopoly (!!) that would require the recipient of the monopoly to build and operate a hospital. The hospital was actually built that way, and the building still stands. According to the brochure we received, however, the contractor lost money on the deal.

Posted by Steve Kelman on Sep 28, 2007 at 12:08 PM


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