End-user oriented Public-Private Partnerships in real estate industry/I galutini vartotoja orientuotos viesosios ir privasiosios partnerystes nekilnojamojo turto sektoriuje.

ABSTRACT. The European Union (EU) is reforming its public services and suggesting Public-Private Partnerships (PPPs) as a solution for producing high quality and cost effective real estate service delivery. However, the use of PPP approach in real estate industries has been found to have significant constraints related to the end-users' (general public's) perspective. The purpose of the paper is to show how PPP projects have failed to produce desirable characteristics expressed in purchasing processes and fulfilment of the end-user expectations. While the customer-oriented development of public services and the needs of the end-users were noted to be crucial points in all five major Finnish PPP projects studied, the case studies pointed out a fundamental lack of understanding and maintaining the end-user perspective through the tendering and evaluation processes. Especially, in the final stage of evaluation, and evaluation criteria used to decision making, the disappearance of the end-users' perspective was evident. The findings are further used to develop a new suggested Public-Private-People Partnership (4P) model. The results can be useful to the public sector's purchasers and to the private sector's providers to understand the limitations of current PPP practices and to further develop their practices towards more customer-oriented service production.

KEYWORDS: PPP; Purchasing; End-users; Customer-orientated; Real Estate Service Delivery

I GALUTINI VARTOTOJA ORIENTUOTOS VIESOSIOS IR PRIVASIOSIOS PARTNERYSTES NEKILNOJAMOJO TURTO SEKTORIUJE

SANTRAUKA

Europos Sajunga (ES) vykdo viesuju paslaugu reforma ir viesasias bei privaciasias partnerystes (VPP) siulo kaip sprendima teikti pigias ir kokybiskas nekilnojamojo turto paslaugas. Taciau pastebeta, kad nekilnojamojo turto sektoriuose VPP poziuris susiduria su reiksmingais suvarzymais, kurie yra susije su galutiniu vartotoju (placiosios visuomenes) perspektyva. Siame darbe siekiama pademonstruoti, kaip VPP projektams nepavyko pasiekti pirkimo procesuose numatytu pageidaujamu charakteristiku ir patenkinti galutinio vartotojo lukescius. Nors visi penki pagrindiniai Suomijos VPP projektai, kurie yra nagrinejami darbe, i klienta orientuota viesuju paslaugu pletra ir galutiniu vartotoju poreikius nurodo kaip svarbiausius punktus, atvejo tyrimai parode, kad gebejimo suprasti bei islaikyti galutinio vartotojo perspektyva is esmes truko ir organizuojant konkursus, ir vertinant. Galutinio vartotojo perspektyvos isnykimas ypac akivaizdziai isreiskia galutinis vertinimo etapas ir vertinimo kriterijai, kuriais grindziami sprendimai. Isvados pritaikytos pletojant nauja siuloma viesosios bei privaciosios zmoniu partnerystes (VPZP) modeli. Rezultatai naudos gali duoti viesojo sektoriaus pirkejams ir privaciojo sektoriaus tiekejams, siekiant suprasti esamu VPP praktiku ribotuma ir toliau pletojant savo praktikas, kad teikiamos paslaugos butu labiau orientuotos i klienta.

1. INTRODUCTION

The member states of the European Union (EU) are reforming their public services and discussing alternatives for producing future public services for their citizens (Bode, 2006; European Commission, 2004a). Public-Private Partnership (PPP) is considered as one solution for producing quality, cost effective public services related to the real estate industry, and PPPs have an important role in the EU's Internal Market Strategy (European Commission, 2003a and 2004b).

PPPs are seen as a possible approach for increasing public services' diversity and quality, and at the same time, using taxpayer's money more effectively (European Commission, 2003b; HM Treasury, 2003; Piekkola, 2003). Recently, discussion of PPP benefits has moved from "Value-for-Money" (VFM) and cost-effectiveness to more innovative development of public service structures in partnership with the private sector (Yliherva, 2006; Demirag et al., 2004; Brunila et al., 2003; CIC, 2000). Since Brunila et al. (2003) noted customer-orientation and innovativeness as the key-elements in the development process of public service structures in Finland, the Finnish Innovation Fund (Sitra) conducted several studies into issue and has setup a special program to increase profitability, effectiveness, and co-operation between the public and private sectors. Traditionally the Finnish welfare state, like its Scandinavian neighbours, is based on wide and comprehensive public services produced by government and municipalities. PPPs, as for a solution for public service production on a large scale, have become an interesting topic as demographic changes puts more pressure on public services, especially the health care services. Consenquently, the public sector in Finland is seeing at alternative ways to fulfil its legal service delivery requirements in the future (Barr, 2007; Yliherva, 2006; Brunila et al., 2003).

According to the author's recent research (Majamaa, 2004 and 2005), the end-users can be considered as rational consumers, and their preferences can be identified using a framework of evaluation criteria based on the advantage of rational consumers, a group of consumers' entitlement to the public services, but with individual and diverse needs. It is clear that there is a need to develop a general framework to understand the end-users' preferences and foresee the diverse service production from the end-users' point of view (El-Gohary, et al., 2006). This paper aims to provide insight on what an innovative evaluation process and customer-oriented evaluation criteria in PPPs could be in practice. An evaluation framework is developed based on end-users' advantage and public material related to bidding processes, and several real estate projects using a PPP approach have been analysed from the perspective of the end-user. The aim of the analysis was to study the requirements and desirable characteristics, given in the purchasing material by public sector, and as certain whether those features still recognised in the evaluation criteria used for decision-making at the final evaluation stage. The suggested framework's usability to analyse PPP projects from the end-users' perspective was tested, and the framework was further developed for practical application to the evaluation process and as criteria for a more customer-orientated evaluation form. The findings of this study expand the traditional PPP model to a new Public-Private-People Partnership (4P) model where the end-users' role is clearly visible.

The framework facilitates understanding the preferences of the end users of public services in the PPP lifecycle. Five Finnish PPP cases were analysed to demonstrate the concepts. Finally, the findings of the analysis and the expansion of the PPP model to incorporate the 4Ps model are discussed. In conclusion, the value of this paper in developing more desirable public services by the 4P model is highlighted.

2. END-USERS PERSPECTIVE IN PPPS

According to the World Bank (2007), benefits from PPPs can be achieved in four main areas: increasing efficiency in the execution of projects; enhancing implementation capacity; reducing risk for the public sector; and mobilizing financial resources by freeing scarce public funds for other uses. At the same time, the extent of benefits from private sector participation, and public authorities' uncertainty of the quality of PPP services have also been criticized (Shaoul, 2005; Kuntaliitto, 2003). The use of PPPs have been mainly justified by invoking international experiences of its benefits compared to the traditional public service production (Nisar, 2007; Zhang, 2006; Earl and Reagan, 2003; IPPR, 2001), but they have not widely considered the context of end-users' participation and perspectives (Ahmed and Ali, 2006; Kaya, 2004; Akintoye et al., 2003).

International studies have been mostly regressive, and concentrate on technical and economical issues, public sector benefits (Shaoul, 2005; Edwards and Shaoul, 2003; Gaffney and Pollock, 1999; Tiong and Alum, 1997), and analysis of the risks of cases and the contracts (Nisar, 2007; Abednego and Ogunlana, (2006); Grimsey and Lewis, 2002; Thobani, 1999). In the field of property development and service production, benefits of PPPs have traditionally measured by using "Value-for-Money" (VMF) as a key-object (EIC, 2003; HM Treasury, 2003; European Commission, 2003b; TTF, 2000). In evaluation processes, based on VFM, the benefits of partnerships are attributed to the participation of the private sector which has better capability and innovation in (HM Treasury, 2004; EIC, 2003; European Commission, 2003a; Grimsey and Lewis, 2002; Treasury Taskforce 1997a and 1997b):

--Controlling risks;

--Design and Building;

--Maintenance of the property;

--Operating assets; and

--Creating third party cash flow.

There has also been a gap in understanding the importance of the influence of the evaluation process and evaluation criteria on service production. While customer-oriented development of public services and the needs of end-users have been noted as the crucial points in innovative development of today's public services and welfare society (Trentmann, 2007; Brunila et al., 2003), the implemented evaluation process and the evaluation criteria have not been developed from the end-users' point of view (Mattar and Cheah, 2006). Thus the purchasing process and evaluation of proposals, from the end-users' point of view can be seen as an important part of the public service development based on PPPs.

3. RESEARCH DESIGN