The Role of Public Private Partnerships, Essay Example

Abstract

The core approach of this rersearch is to discuss and evaluyate the role of P3 (public private partnerships) through which the construction contractors can start supporting government contracts for a long-term developmentmental domain to the US construction industry. It has been noted that Public Private Partnerships is very efficient in increasing and relevantly offering greater solutions to the infrastructural issues. Moreover, it can offer faster project completion added by determined deduction in the delays over the infrastructure projects. Keeping these types of points under consideration, this research concentrates in creating the platform for the construction contractors in offering necessary support to the State Government so that the US construction industry can attain excessive benefits and thereby offer economic stability to it.

In this approach, the research is following qualitative research methodology in order to collect authentic data from the people related to construction industry. The tools for this methodology are the quetionnaire and interviews conducted through telephones and face-to-face provisions with various contractors and government officials from selected demographic area.

Introduction

The role of construction industry in the economy of the United States gets well realised by the development as well as the proceedings for the occupancy of the same by the private and the public dominances. There is a very distinctive benefit attained in the economic periphery of the US during the phase of recession, which is 2008-2011. During this phase, the performance of the construction industry attained radical downturn and was much affected by the housing sector. During the period of recession, 2008-2011, there was an economic downturn noted in the housing added by the construction business in the US market. There were substantial losses caused due to the policies that removed them from pure construction field and sent them on paths of other sorts of income resources.  As noted by Chapin and Jermain (2005), there are diversified issues affecting the construction industry of the US.  Those companies that remained steadfast in construction with few avenues to other income resources experienced the greatest loss.  Those construction companies maintaining strong diversified income resources usually survived.  To this context, Bettis and Manahan (2010) declare that construction companies maintain single fields of interest and were the first to fail.

However, it was under the initiation of the State Government that this sectgor managed to offer direct along with indirect impact in the US economy by 2011. It offered a spending margin of $2.27 trillion, which accounted for a total of 15% of GDP of U.S. economy in 2011 (Fuller, 2012). As noted by Rodriguez, J. (2012), the development of the construction industry is possible whan there is an amalgamated effort led by Public Private Partnerships or the P3 formulation. Under this formulation there is adequate room for the development of new strategic modes of alliances, scopes for the improvement of public services and above all noptable reduction in the government costs. The approaches of P3 (public private partnerships) can turn up as the negotiating thread for diversified contracting methods as well as approaches and very aptly produce projected results. It can also allow faster benefit towards all the participants and the citizens related to this domain. In support of his declaration Rodriguez, J. (2012) offers some of the distinctive examples from the construction industry. The most predominant constructions in this field can be noted as the constructions of Hudson-Bergen Line from New Jersey, the JFK AirTrain, the construction from New York and the construction of E-470 Toll Road Colorado with $ 2.2 billion, $1.9 billion and $722 million costs respectively.

Hypothesis

As the State Governments of the US is responsible for the construction as well as maintenance of various housing sector, it is necessary for the construction companies to offer adequate support to the State Government. It is very apt to state that in order to survive current downturned economy of the US in the construction industry, the construction contractors must forsake the private sector for government contracts. Without their support under the formulation of P3 (public private partnerships), developments in tjis sector seems very hard.

Research Question

The correlation between the private construction contractors and the State Government seems mandatory in offering firm developmental foundation to the construction industry. In this reference, the research question for this research is –

Can the construction contractors can turn up as assets to government contracts in mainatining developmental strategies to the construction industry of the US?

Literature review

The approaches led by the formulation of Public Private Partnership (or the PPP, P3 or P3) withstand government service or the aspetcs related to the private business that ventures determined funding as well as operation by a determined partnership of respective government and company or companies from private sector. This formulation is inclusive of the authoritative rights of public sector in coordination with the private companies or the individual contractors.

PPP involves a contract between a public sector authority and a private party. It is here that the private party offers public service or determined project and thereby assumes notable substantial as well as functional financial, operational, and technical risk for the undertaken project. There are some PPP, where the cost is initiated and bear by the users of service provider and not by channelised taxpayer. In a way, there is the private finance initiation under this formulation, where the capital investment gets under private sector over the weakness in relevance to a contract that is noted with government in terms of offering al sorts of services as well as cost related to the service provision borne partially or wholly by the respective government. Contributions of the government towards PPP can be a sort of transfer made over current assets.

The infrastructure sector in particular has bene much supported and attracted by the formulations of PPP. The initiations led by the government are subject to offer capital subsidy. This remains in the form of one-time grant, in order to create more attractive prticipation of the private investors or the contractors. There are instance, whereby the government is liable to support construction project and thereby takes the initiation to offer revenue subsidies. These are also inclusive of the provisions for tax breaks or the scope of removing guaranteed modes of annual revenues in reference to a fixed span of time. In reference to the construction industry, Pratt (2010, p.9) states “…especially infrastructure projects often undertaken as public- private partnership, or P3, initiatives. Public-private partnerships are usually formed between a government agency such as school board and private organization that is often a conglomerate consisting of financier, a builder, and perhaps a facility operator.” In this context McKeon and D’Agostino (2012) rightly declare, “I see a wave of public private partnerships (P3) coming out in the next several years, and how CMs are integrated into the P3 initiative remains to be seen.” There is definitely a steady development in the involvement of PPP in the construction industry. According to Fussell and Beresford (2009) state

“The private sector has always played a role in the provision of public infrastructure. Governments hire engineers and architects to design structures and contract with construction firms to carry out those designs. Commonly, this is done through a design-bid-build process in which governments procure design and construction services separately. This is commonly known as “public procurement” and is held as the antithesis to the P3 model.”[1]

There are innumerable benefits that are offered by the implication of P3 or PPP in the construction industry. These benefits can be noted under many distinctive empirical perspectives. Public Private Partnerships is liable to increase and thereby creates room for greater infrastructural solutions. This is the reason that the contractors from the private sector construction domain can have maximum benefits in dealing with the difficulties of infrastructural issues. It is very strong in offering completion of faster proceedings of the project and thereby reduced all sorts of delays in the field of infrastructural projects. This is both economically and socially advantageous for the private contractors as they come in association with governmental initiatives.  In reference to Return of Investment (ROI), the PPP remains as the greatest aspect in comparison to traditional methods, as there are the innovative designs added by the financing proceedings. PPP further identifies expected cost for the life-cycle through analysis as well as method of scheduling operation and further the proceedings related to maintenance component for any infrustructural project, or the modes of programming cost and the noted expected devaluation. In this respect, the contractors who are following the construction sector projects gets maximum benefits on financial grounds. Many domains are well handled and offered adequate previleges by the governemnt and that makes the proceedings of infrastructural issues more relevant and smooth for the contractors from the private sector. By offering these provisions, the local and the federal government earn much support from private domains and as such, the promptness in the completion of the work turns very obvious. In this cotext, in late months of 2008, Winnipeg city council adopted from Deloitte & Touche, an accounting firm with the recommendation that the city seek for a “strategic partner” in the sector of “design, construction, finance and operation of two water pollution control centers” (Fernandez, 2009).

There are other benefits as risks get weighted from the perspective of initial conceptual of all the stages in order to determine determined feasibility meant for a noted project. Here the project execution and its process of operation related risk are transferred absolutely to private sector, where the public component remains in a win-win status. Though this is kind of hindrance for the private contractors, yet they are ready to take this risk as they avail lots of aforesaid benefits agaisnt their participation with the government for respective projects. P3 is very strict in allowing government funds in the process of being re-directed towards other very relevant and important areas of socio-economic developments. It is also liable to reduce government budget added by instances of budget deficits. There is also a kind of assurance regarding the high quality standards mainatined for the entire expected life-cycle of respective project (Rodriguez, 2012).

Research methodology

This study will use qualitative methods in order to understand the afore mentioned research question. Primarily, the study will use survey and interview methods at a number of different construction companies in order to understand why contracting companies and government offiices. The study will aim at interviewing 50 construction firms located throughout the country and of different sizes and business focus. A report will then be printed highlighting the main themes brought up in each individual interview, and the interviews in each category (private contractors versus government contractors).

Selection of Methodology

The question of whether to use qualitative or quantitative methods to explore a research question is a critical one.  For this particular research question, qualitative methods possess a number of advantages over quantitative methods.  First, while quantitative methods might provide evidence of a change in a contractor’s bidding behavior and overall construction patterns, it does not provide explanations for what factor(s) might explain the change.

While quantitative information would be useful in assessing the performance of different government contracting firms, it would not answer one of the main questions: why did those changes occur over time. That is, what changed in either the market or management’s thinking to precipitate the change in corporate strategy? That is, the statistics would show changes in the firms bidding and construction behavior over time; however, it would not show what precipitated that change.

Creswell (2009) described quantitative studies as a hard science while Padgett (2004) declaresquantitative studies for use in the social sciences. Quantitative research is a hard science. Using deduction, it synthesizes data. It is best used as a single reality when data is taken and compared and contrasted. Quantitative research demands and strives for validity.  Similar but different industries should produce similar results. Padgett (2004) Johnson and Christensen (2000) supported mixed methods for data gathering techniques. Qualitative methodologies require a serious time commitment along with financial resources in order to visit local contractors in any given area. Observing multiple contractors across 50 states is a lifework that, by the time the data has been gathered and analyzed the technology will have changed enough that the data collected will become obsolete. Mixed methods suggest using qualitative research gathering in a relatively small area, usually a city or at best, a single state.For larger studies such as those covering multiple states, questionnaires are usually prepared and when returned to the researcher, he or she will have enough similar data to prepare a statistical analysis.

In order to understand the advantages of the qualitative method in assessing this question, a hypothetical quantitative method study will need to be pondered.  A quantitative study of this research question would likely consist of data for each different company (50 in all) that shows the projects they bid for, their successful and failed bids and their overall change in business pre- and post-recession.  Thus, one could perform a basic data analysis to understand how many projects each firm won, for which type of project, and the total awarded to the firm. A more sophisticated quantitative analysis might create a regression analysis for both categories of firms that creates a predictive equation for which type of firm has the advantage in bidding for certain projects. The quantitative analysis would also help one to understand the key factors in predicting what might happen in the future among construction firms.

Qualitative methods, on the other hand, would give greater texture to why those changes took place. For example, the survey component of the study would allow the researcher to baseline the firms and understand the basic business characteristics and market position of each construction firm.  Perhaps more importantly, the interview portion of the study would allow the researcher to understand what decisions and market factors played a key role in a bidder’s decision to either pursue a certain bidding strategy or not to.  This would also be useful in trying to understand if the sample was representative in making generalizations about the larger sample of construction firms.

Selection of Sample

The firms will be chosen randomly from two different lists:

1. The first 25 firms will be selected from a list of firms that provides construction services primarily (although not exclusively) to government clients;
2. The second 25 firms will be selected from a list that provides construction services primarily (but not exclusively) to private clients.

A random method will be used to choose the firms giving all firms in the field a random number.  A random number generator will then be created to choose numbers that correspond to the firms chosen.

Although the sample will be divided into two different categories of government contractors, the answers on the informational survey will be the same.  In total, there will be four parts included for the interview/ survey to firms.  These are:

1. Basic information regarding the firm and its history
2. Basic information regarding the firm’s economic history including its clients

• Preference for private or public contracts

1. The firm’s performance during the economic downturn

The qualitative survey will be used by a research assistant for face-to-face interviews with relevant managers in the company.  In addition to asking the questions, the research assistant will also record the entire interview via tape recorder and then transcribe the entire interview.  Once the transcript of the interview is finished, another research analyst (not the original research analyst who conducted the interview) will then enter the interview text, question-by question, into Envivo qualitative software for analysis.

Expected conclusion

It is too early in the study to report on expected findings, but following the material readily available on similar industries? It is it is likely that construction businesses (like other firms) that have depended fully on a single source of income have had difficult times or have ceased operations during our economic downturn.  Those businesses which have expanded their operations beyond a single product or service? Have been the most successful. In the case of construction firms they could be investing isn banking, specifically high interest mortgages, providing financial resources for individuals who, without additional resources, find themselves in foreclosure.  These same businesses might find themselves outsourcing employees and materials to government agencies which are trying to keep their own debt to a minimum.  The mixed methods study, especially with the use of NVivo, will help the researcher explain the difficulties found in some construction firms while others are maintaining a prosperous operational base.

The implication of the tools like questionnaire and any documentation supporting the questionnaire would be the last section of the research paper; the section would follow the reference section and would be in the appendix.  For the purpose of this document, they have been included in the research analysis. Miles and Huberman (1994), Padgett (2004), and Janesick (2010) support the notion that although the questionnaire should be free from bias it is also the beginning of the blueprint for further research.  The researcher needs to start out with some kind of vision about how things are or in what order they should be.  The actual answers to the questionnaire may vary, and freeing one’s study from bias means that different answers may mean different categories and different coding.  But again, the blueprint has to start somewhere.  Kosner (2006) noted that before he started his study he blueprinted the issues, and then changed them according to the responses he got to his questionnaire. In this reference, this research will also opt to go for some Pilot Survey to assess the validation and authentiation of the noted research.

Sources

Creswell, R. (2008). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches.  Sage Press.

Fernandez, L. (2009) Fast Facts: Wastewater and Water Privatization: A Clear and Present Danger.Winnipeg: Canadian Centre for Policy Alternatives. 29 January 2009. http://www.policyalternatives.ca/~ASSETS/DOCUMENT/Manitoba_Pubs/2009/FF_Water_Privatization_29_01_09.pdf (retrieved on 10th of Dec.’ 2012)

Fuller, S. S. (2012) How Office, Industrial and Retail Development and Construction Contributed to the U.S. Economy in 2011. Construction data provided by McGraw-Hill Construction. NAIOP Research Foundation. May 2012. http://www.naiop.org/~/media/Research/Research/Research%20Reports/How%20Office%20Industrial%20and%20Retail%20Development%20and%20Construction%20Contributed%20to%20the%20US%20Economy%20in%202011/2011contributiontoeconomy.ashx (retrieved on 10th of Dec.’ 2012)

Fussell, H. and Beresford, C. (2009) Public-Private Partnerships: Understanding the Challenge. Centre for Civic Governance is an initiative of the Columbia Institute.Second Edition. June 2009. http://www.civicgovernance.ca/files/uploads/columbiap3_eng_v8-webpdf.pdf (retrieved on 10th of Dec.’ 2012)

Janesick, V. (2010). Stretching exercises for the mind. Los Angeles, CA: Sage Publishing.

Johnson, B. & Christensen, L. (2000). Educational research: Qualitative, quantitative, and mixed methods. Thousand Oaks, CA: Sage Publications.

Kosner, J. (2006). Leadership perspectives that facilitate school improvement: An ethnographic case study of a public elementary school principal’s leadership role. New York, NY: University Microfiche Incorporated.

McKeon, J. J. and D’Agostino, B. (2012) Becoming a Construction Manager. Wiley Desktop Editions.

Miles, M., & Huberman, A. (1994). Qualitative data analysis. Thousand Oaks, CA: Sage Publishing.

Padgett, K. (2004). The qualitative research experience.  Brooks Cole.

Pratt, D. (2010) Fundamentals of Construction Estimating. Delmar Cengage Learning; 3 edition

Rodriguez, J. (2012) Public Private Partnership Pros and Cons. Public Private Partnership (P3): Their benefits and disadvantages. About.com Guide. http://construction.about.com/od/Government/a/Public-Private-Partnership-Pros-And-Cons.htm (retrieved on 10th of Dec.’ 2012)

[1] “In a P3 a government enters into a long-term contract with a group of companies (usually two or three) that have formed a consortium specifically for that project. In the most common form of a P3 the consortium takes on the responsibility of not only designing or building a facility but also operating, financing and sometimes even owning it for an extended period of time (often about thirty years). The various functions normally associated with providing a public facility and associated services are bundled into a single long-term contract, and the consortium is responsible for obtaining financing. In return, the consortium receives regular payments.”