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
The research aims to examine what an evaluation process of PPP with
customer-oriented evaluation criteria could be in practice. Based on
multiple case studies, a theoretical framework has been devised to
integrate the end-users in the PPP development process. The advantage
for the end-user is based on the author's previous research into
PPP from the perspective of a group of rational consumers with
individual needs (Majamaa, 2004 and 2005). In the literature, the theory
and behaviour of rational consumers is not unambiguous, and has been
examined from various scientific perspectives (Miljkovic, 2005; Abell,
1996). However, what are common to the economic and behaviourist
theories of rational consumer behauvior (Zafirovski, 1999; Varian, 1996;
Rohlf, 1996; Heap et al., 1992):
1. Individuals are capable at making decisions based on their own
preferences, for example, individuals understand the value/quality and
Value-for-Money aspects;
2. There are multiple options to act (choice) and results are
related to choices made; and
3. Individuals are willing to make free choices from multiple
options.
Establishing what rational consumers prefer as individuals or as a
group of individuals is very difficult in the case of large topics, like
public services. In this study, instead of naming detailed preferences,
the foundation is laid to insure that the basic axioms can be fulfilled.
The assessment of PPP service provision from the perspective of rational
consumers with individual needs is founded on the following three
presumptions, which fulfill the aforementioned axioms, through which a
rational consumer maximises their benefits (Majamaa, 2005):
1. The "Value-for-Money" both in an individual's
personal decisions and behaviour as a part of the community, as well as
expectation that the representative leadership of the community also
adheres to the principle;
2. Appreciation for diversity in selection and the resultant
ability to make choices between different alternatives; and
3. Independent choices and expectation of having the possibility to
make free choices based on personal preferences.
4. DATA COLLECTION
In order to devise the framework and test for appropriateness, five
Finnish PPP projects were selected, where the public sector was the
purchaser of the functions offered by the project (see Table 1, and
"Service Provision" in it). The projects include:
--A real estate investment;
--A private body responsible for Design and Build and
technical-maintenance; and
--Financing and/or ownership of the property.
The primary nature of all the selected projects was the
Build-Own-Operate (BOO). For some projects, like Kaivomestari and
Dynamicum, the public sector has an option to purchase the real estate
asset from the private investor at reversion points during the service
contract or at the end of the first service period.
The research relies on the material and information publicly
available from the selected cases. By the law all the bidding material
and the information and material related to the decision-making in
public purchasing process should be publicly available. The purchasing
processes for the cases have also been assessed according the Finnish
Public Procurement Act (1505/1992).
5. DESCRIPTON OF THE SUGGESTED FRAMEWORK
Requirements, desirable characteristics and evaluation criteria
used in the five PPP cases were analysed using the categories of Life
cycle approach, Diversity, and Customer selection. Life Cycle approach
criteria included economic features related to
"Value-for-Money" (VFM), juridical (legal) features related to
the concession agreement, quality and technical features related to the
design and building, quality of required public core services, project
management and certainty of service performance, and risk sharing and
risk management. Under Diversity criteria were assorted requirements,
desirable characteristics and evaluation criteria, which embodied added
value in public core services, added value from networked service
production, diversity of public core services and service development,
and service and production innovations in public core services. Customer
selection criteria included requirements, desirable characteristics and
evaluation criteria which embodied end-users' potential to make
free choices, and criteria related to services provided to third-parties
(directly from the end-users--customers not incluted in the
PPPcontract), outside or in addition to core public services. These
kinds of elements were innovations in third-party services, extra cash
flow from third-party services, increases of utilization rate, and
increases of potential for people to make free choices related to public
and private services. Using these three categories we studied whether
the given requirements, desirable characteristics and evaluation
criteria were used systematically through out the purchasing processes,
and how these categories were emphasized in the selected cases.
Purchasing processes were divided into four stages for categorisation:
1. Pre-qualification requirements and evaluation criteria for
selecting tenders;
2. Requirements and desirable characteristics given in tendering
material;
3. Itemised evaluation criteria given in tendering material; and
4. Evaluation criteria used for decision making.
The results of the categorisation process are represented in Table
2. For brevity, the cases are denoted as follows: K = Kaivomestari; P =
Pyynikki; F = Frami; D = Dynamicum; and VP = Vantaan Point. These
letters in Table 2 refer to the single features used in the original
bids.
6. EVALUATION PROCESS ADOPTED IN THE PPP CASES
The suggested framework, based on end-users' opinion and
perspective of a group of rational consumers, was useful for analysing
the cases. The PPP projects and the evaluation features used in their
purchasing processes accomplished three main criteria categories: Life
Cycle approach, Diversity, and Customer selection. Each of the studied
cases had features related to the first category--Life Cycle approach;
four of five of them had features related to second category--Diversity;
and three of five had features related to the third category--Customer
selection. As the projects were designed mainly to fit the VFM
principals, it was expected that most of the features would relate to
the category of Life Cycle approach (Shen et al., 2006). As there where
also many features related to the other two categories in the
Kaivomestari and the Pyynikki projects, we discussed the findings with
the owners of these projects. Accordingly, we can state that innovative
and customer-orientated development of the required services, as
proposed in the categories of Diversity and Customer selection, seemed
to be important to the development of the projects, but where lost in
the final stage of evaluation by the public sector agencies.
In the first stage of purchasing processes, pre-qualification, the
aim was to choose the best companies for the tendering process. The
criteria to do this should be related to the capability of the company,
not to the suggested outcome of project (Laine, 2006). The
Pre-qualification stage was used in the Kaivomestari and Pyynikki cases.
In Kaivomestari it was called 'Pre-qualification round', and
in Pyynikki it was the 'First round of the purchasing
process'. In the other cases, the processes went directly to the
tendering stage. Features given in tendering material were divided into
two stages: requirements and desirable characteristics; and itemised
evaluation criteria. All the criteria categories and all the cases were
included in the stage of requirements and desirable characteristics. The
Itemised evaluation stage was included in all the cases, but only
Kaivomestari, Pyynikki and Frami had evaluation criteria related to
Diversity features, and Kaivomestari also provided features related to
Customer selection. In the fourth stage of the purchasing processes,
evaluation criteria used for decision-making, there were only features
from the Life Cycle approach category. Even in the Life Cycle approach
category, the used criteria differed between evaluation stages,
especially in the Pyynikki case, from itemised evaluation criteria given
in tendering documents.
In Kaivomestari, there were possibilities for tenders to add value
in public core services and also get added value from networked service
production, which was also noted in three other cases--Pyynikki,
Dynamicum, and Frami. In all the other projects except, Dynamicum and
Vantaan Point, there was demand to expand the diversity of core public
services, and requirements and desirable characteristics identified for
service development, at the beginning and during the service period. In
Kaivomestari, service and product innovations for teaching facilities
and leisure centres were forward-looking. With the nature of Pyynikki,
being a development project renovating an existing block of buildings
with the possibility of constructing new ones, there was extra
flexibility to create diversity to demand core public services, and room
for new services and business ideas for third-party services.
Features related to Customer selection were demonstrated in the
Kaivomestari and Pyynikki projects. Extra cash flow from third-party
services and innovations in third-party services were important
requirements and desirable characteristics related to them, and given in
tendering material. In Kaivomestari, the benefits of using a PPP,
instead of a traditional model, were identified as third-party use of
facilities outside school times, and extra cash flow created by special
business ideas based on that use. In Pyynikki, the development of the
whole block, located in the city centre, was an essential issue, and
several examples of how to develop it were given in the information to
tenders. The existing swimming hall could be developed into a city-spa,
existing hostel cganged to a hotel, and other existing industrial and
commercial buildings in the block could be developed as residential
housing. Other Customer selection features in Kaivomestari, like
increases of utilization rate, and possibilities to make free choices
related to public services, were mainly used to specify desirable
characteristics of the project. To sum up, Kaivomestari had many
possibilities to develop third-party services based on Customer
selection by expanding the diversity of core public services and use of
the facilities, and Pyynikki, with the whole block under development,
had great possibilities to create new services directly for the
end-users.
The essential finding from the case studies was that the criteria
used for decision-making considered only a small number of the possible
features available in purchasing processes. All the requirements and
desirable characteristics, related to Diversity and Customer selection,
given in the pre-qualification stage and in two tendering stages were
not applied to decision-making stage. The projects had requirements,
desirable characteristics and criteria considering the end-users'
perspective, but those were not used to evaluate the proposals. While
customer-oriented development of public services and the needs of
end-users are noted to be crucial points in innovative development of
today's public services and welfare society (Yliherva, 2006;
Brunila et al., 2003), the analysis pointed out a fundamental lack of
end-users' perspectives in the evaluation processes, especially in
the evaluation criteria used for decision-making. Evaluation processes
used in these cases were mainly based on Life Cycle approach criteria,
were not customer-oriented and would not be advisable from the point of
public services' end-users.
7. BUILDING THE 4TH P INTO PPPS
Traditionally PPPs have been based on the purchaser-provider model,
where the purchaser, a unit of the public body, and the provider, a
private body, assumes homogeneity of the end-users of services. In
Scandinavia, public service provision in the past has been closely
connected to decommodification; in other words, equal service provision
for all members of the community (Aronen, 2003; Esping-Andersen, 1990).
When the focus of PPPs have been in the interface of public and private,
the benefits of customer orientation have been partly wasted (Majamaa,
2004). If the end-users (people) are involved in the partnership, the
focus can be turned to the interface with customers. The end-users are
the customers of public authorities, via its duty to offer public
services, and become the customers of the private service provider via
combined public-private service production and private, direct service
production. In customer-orientated thinking, today's post-modern
world promotes individualism and the diverging needs of the members of
the community (Bauman, 2001). The changing needs and lifestyles of
individual consumers affect the formation of one's self-identity,
which is strengthened through consuming (Bauman, 2002 and 2007). In
accordance with this thinking, the community of end-users is actually a
far more heterogeneous group of consumers with different needs (see
Figure 1).
The purpose of the public sector is not to directly monitor
psychological changes in consumers or to predict future needs, but to
meet existing demand for services. It is, however, in the interests of
the consumer community, that the public sector can take advantage of
service provision models that allow service provision to be adjusted
with optimal flexibility for changing demand (Majamaa 2004). The
development of PPPs to an innovative and customer oriented
Public-Private-People Partnership model is showed below, in Figure 2.
In the PPP model, the private service provider is operating through
a public purchaser with a PPP contract. The public service provision is
formally supplied to the end-users (people) by a public body. Even when
a private service provider is responsible for the actual service contact
with the end-users, feedback formally comes via the public body. The
crucial finding is that the focus was on the PPP contract between public
purchaser and private provider. Service provision was based on the PPP
contract and had no customer-imput from the end-users. This kind of
service production can be cost-effective, but it is not
customer-oriented. The customer-oriented 4P model is a more optimal
model for flexible service provision and changes in demand. In the 4P
model, the focus is on the interface between the end-users (people) and
the service providers, both public and private. The formal service
provision is based on a PPP contract and core public services, but a
private service provider is also able to develop other services by
expanding the service provision to correspond to the demand of
end-users. In the 4P model, the private provider is also able to create
third-party services based on Customer selection directly with the
end-users. Customers' needs are recognised by two separate
channels: formally via political decision-making and
municipalities' local democracy; and informally in daily contact
with the end-users and by Customer selection in third-party services.
For example, in the Kaivomestari case, where the core service was
education, private service providers are producing the educational,
environmental, and support-services related to it. The public body as
contracting party and party responsible for the purchasing process is
not considered as the only customer in the process as the teachers and
the pupils of the school are even more important customers to the
service provider. The sport activities in Kaivomestari included services
based on the PPP contract, like a swimming pool and gymnasium. In
Kaivomestari, the extra cash flow to the private service provider from
the third party, the end-users directly, has been quite low. Because the
decision-making was based mainly on Life Cycle approach and favoured a
proposed design to satisfy the public purchaser's needs and not the
use of facilities after the school times, the lay-out of the building
limits the creation of services directly for the other end-users.
[FIGURE 1 OMITTED]
[FIGURE 2 OMITTED]
8. NEW SUGGESTED FRAMEWORK FOR 4P PROJECTS EVALUATION
Findings from the case studies point out that customer-orientated
service provision should be considered in the early stages of project
development. Then the perspective of the end-user could entirely be
incorporated into the purchasing process. The project development stage
is crucial because the main decisions related to investment and service
provision occur during this stage, and over the concession period,
changes are extremely limited (Dixon and Pottinger, 2006; Kaya, 2004).
The property, which is usually the most expensive single element in the
contract, gives physical limits to the service production to be
conducted in it (Nisar, 2007). During the concession time, major changes
are normally unacceptable because the investors like to secure steady
cash flow, based on a tight contract (Dixon and Pottinger, 2006).
In some of the cases, like in Vantaan Point, Frami and Dynamicum,
the scheme did not give much space to customer-oriented thinking and
innovative service developments. One solution to get innovative
proposals could be to keep the project, and the service provision
flexible. However, in the studied cases, the construction processes and
the buildings themselves were the main focus of the purchasing
processes. As noted before, the evaluation criteria used for
decision-making in all cases included only Life Cycle approach features,
and in some cases, like in Vantaan Point, Frami and Dynamicum, almost
only technical ones. This is conceivable, but led the focus from service
production to property and maintenance issues. From the perspective of
the end-users, the property issue is not linked only to the Life Cycle
approach criteria. The Diversity of service provision and Customer
selection also includes many features related to the property. Diversity
and Customer selection both need the development of flexible spaces, in
the beginning and during the concession period which has demands on the
property.
The lack of application of the evaluation criteria, and the missed
potential of service development from end-users' perspective,
particularly in the decision making stage, raises a need to develop a
customer-orientated framework for evaluation processes. This new
evaluation framework should include all the three criteria categories as
evaluation stages, and it is developed for use at pre-qualification and
for evaluation of proposals in the tendering process. In
pre-qualification the features should be related to the company's
capability, and in the tendering stage, to the service outcome of
proposals (Pohjonen, 2006; Laine and Junnonen, 2006). If the purchasing
process itself has more than one round, the features can be more open in
early stages to get innovative solutions, and tighten up during the
decision-making stage.
The new framework can also be used to compare the Public Sector
Comparator (PSC) and PPP solutions. In comparison, PSC is important to
point out the benefits of PPP and to verify the costs of it.
Traditionally, the PSC has only been used on to the best PPP alternative
(Treasury Taskforce 1997b), and only with "Value-for-Money"
(VFM) criteria. From the end-users' point of view, it is
fundamental that the PSC is on the same track with PPP solutions in the
evaluation process (Majamaa, 2004 and 2005). This new framework makes it
possible to compare all the elements, not only the VFM features. In the
studied cases only in Kaivomestari were the PPP solutions were compared
using PSC during the tendering process. In Finland, in many cases like
Kaivomestari, the public sector had difficulties calculating the real
costs of traditional service provision for the PSC. Knowledge of the
ecomonics of existing service production is the first step to developing
more desirable and cost effective public services in future (Nisar,
2007; Zhang, 2006; Piekkola, 2003). As in Espoo, where the city had
difficulties in calculating the costs of service delivery, Kaivomestari
as a PPP project with detailed cost estimation of all the services for
next 25 years was seen as an example way to calculate the cost and be
one way to help this evolution towards more desirable and cost effective
services.
The three categories--Life Cycle approach, Diversity, and Customer
selection--comprise the stages in the evaluation process. By evaluating
all the proposals through the three evaluation stages, the
end-users' point of view is ensured. The customer-orientated
criteria have been divided into four categories based on the findings
from the case studies. The customer-oriented stages and criteria for
evaluation in the purchasing process for 4P projects are presented in
Table 3.
The category of "Economic features" is based to the VFM
criteria. In its first stage, the Life Cycle approach, VFM is related to
core public services and property investment. In the next stages,
Diversity and Customer selection, the key issue is the added value for
both public core services and private third-party services. The
measurement can be done, for example, by calculating the savings from
effective and innovative private service production in core services and
extra cash flow from third party services. In the studied cases, quality
and technical features of property investment were related closely to
the Life Cycle approach. In the customer-orientated evaluation process
more weight is added to the flexibility and usability of the spaces,
which is essential to service development and innovations in public core
services and in third-party services (Shen et al., 2006).
The next category "Public and private service features",
is related to the service delivery, and design and maintenance of
property. A very important feature in this category is the innovative
capacity to develop both public and private services during the
concession period. If the private body does not have an opportunity, and
if the public body does not insist on the development in services, the
conditions for innovative development do not exist. In these cases, like
in all the studied projects, the concession period is looked to be
stable, and does not encourage any progressive development in services.
The public sector concentrates on core public services, as stated in the
PPP contract, and the private sector is only looking for ways to provide
required services with minimum cost. From the end-users' point of
view, the optimal situation would be when the private sector could
actively develop third-party services and core public services would
also get the benefits of this development. In the case studies, the
Kaivomestari and Pyynikki projects were looking for this kind of
development, but still the decisions at the final evaluation stage were
made only in relation to stable core service production.
In the third category "Risk sharing and management
features", customer-oriented evaluation processes includes risks
and their management from not only related to the investment and core
service production, but also from the Diversity and Customer selection
approach. Networked service production and third party-services add new
type of risks to the service delivery and should therefore be considered
separately from Life Cycle related risk in Diversity and Customer
selection stages.
In the customer-orientated evaluation process, features are linked
to each other and all of these corroborate with the main principles of
PPPs to increase public services' diversity and quality, and at the
same time use the taxpayer's money more effectively. The Diversity
and Customer selection features have a positive impact on several
essential elements of evaluation and decision making, like: utilization
rate; cash flow; residual value; quality of service; innovativeness; and
risk management. Third-party services, based on Customer selection, have
a positive impact on the utilization rate and the cash flow. When the
operator is using same the facilities to direct services to the
third-party, in an open market situation, the updating processes of
facilities and service development related to it, is not only motivated
from the contract term to avoid sanctions, but also becomes crucial to
the operator to be able to tempt third-party customers. This kind of
development needs innovations and can be seen as a guarantee for quality
services and improvements also in core public services during the
concession period. Diverse service provision needs flexible and
maintained property and therefore increases the residual value of the
property. All these features are affecting the risk sharing and risk
management elements of the project. Dynamic and positive relationships
between the public and private sector, working together to deliver good
quality core services and creating new service provisions to the only
real customers, the people, is the optimal solution to avoid risks and
get benefits from the partnership.
9. CONCLUSION
The member states of the European Union (EU) are reforming their
public services and discussing alternatives for producing future public
services for their citizens. Public-Private Partnerships (PPPs) are
considered as one solution for providing quality and cost effective
public services.
Using the suggested framework, based on the theory of rational
consumer and public material related to bidding processes, selected PPP
cases were studied from the perspective of the end-user. The research
aimed to study the requirements and desirable characteristics, given by
public purchasers during the purchasing process, and whether those given
features have been recognised in final evaluation stages and evaluation
criteria used for decision making. The suggested framework found to be
usable to analyse PPP projects.
The findings of this study were used to develop a new
Public-Private-People Partnership (4P) model, where the end-users'
role is clearly visible. While customer-oriented development of public
services and the needs of end-users have been noted to be crucial points
in innovative development of today's public services and welfare
society, the analysis pointed out a fundamental lack of end-users'
perspectives in the evaluation processes, especially in the evaluation
criteria used for decision-making. Evaluation processes, used in the
studied cases, were mainly based on Life Cycle approach criteria and not
customer-oriented and would not be advisable from the point of public
services' end-users.
There was a lack of application of the evaluation criteria, and the
missed potential of service development from the end-users'
perspective, particularly in the final decision-making stage. As a
practical application of this research, a more customer-orientated
framework to evaluate PPP projects was developed. The new developed
framework includes three criteria categories as evaluation stages: Life
Cycle approach, Diversity, and Customer selection.
The results of this study can be useful to public sector purchasers
and to private sector providers to understand the limitations of current
PPP practices and to further develop their practices towards more
customer-oriented service production. To the end-users' of public
services, results of this study are valuable in understanding the
possibilities and benefits of PPPs and 4Ps models in public service
production.
Received 17 August 2007; accepted 23 November 2007
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Table 1. Basic information of selected PPP cases
Case Purchaser Function
Kaivomestari [K] in City of Espoo High School, swimming
the City of Espoo and sport centre
Pyynikki [P] in the City of Tampere Swimming and city spa
City of Tampere centre with possibility
to develop private
business related to the
services (hotel, shops,
exercise studios and
so on)
Dynamicum [D] in the Senate Properties Office building for
City of Helsinki (owned by Finnish Government's units
Government)
Frami [F] in the Seinajoen Centre of innovations
City of Seinajoki Teknologiakeskus and technology: office
Oy (owned by the space and learning
City of Seinajoki units to the local
and other local university
public bodies)
Vantaan Point [VP] in Vantaan Local learning and
the City of Vantaa teollisuuskiinteistot information centre:
Oy (owned by the library, international
City of Vantaa) school and kindergarten
Case Service provision
Kaivomestari [K] in Design & Build
the City of Espoo Technical-maintenance
Financing and ownership
Operating (all services
excluding teaching)
Pyynikki [P] in the Design & Build
City of Tampere Technical-maintenance
Financing and ownership
Operating (Swimming
centre and city spa)
Dynamicum [D] in the Design & Build
City of Helsinki Technical-maintenance
(partial)
Financing and ownership
Frami [F] in the Design & Build
City of Seinajoki Technical-maintenance
Financing and ownership
Vantaan Point [VP] in Design & Build
the City of Vantaa Technical-maintenance
Financing and/or
ownership
Option to create leisure
service
Table 2. Requirements, desirable characters and evaluation
criteria used in the analysed PPP cases
Criteria categories Stages of purchasing process
Requirements
and desirable
Pre- characteristics
qualification given in tendering
Life Cycle approach features requirements material
Economic features
Overall costs and Net K P F VP D
Present Value
Financial costs and K P D
security of finance
Pricing mechanism K K VP D
Residential value of K K
assets
Juridical features
Requirements of Public K P
Procurements Act
Juridical competence of K K
tender
Commitment to the P K D
proposed contract
The legal structure of K P
the company and it's
shareholders
Quality and technical
features related to the
design and building
Features related to P P
architectural and
aesthetic values
Usability and K P F VP D
divisibility of space
Internal environmental P K P D
quality
Mechanical and Electrical
installations
Sustainability and K P VP D
materials used
Quality of required core
public services
Quality assurances K K D
Continuance of the P
services and competitive P
advantage to other
service providers
Quality of the services
Service organisation and K P K P F D
it's experience
Options to research and K
development of the used
PPP model
Project management
Implementation K P K P F VP D
organisation and it's
experience
Timetable of implementation P K P VP D
Security features for work V P
safety and environmental
safety
Risk allocation and management
Risk allocation and risk K P K F
management
Understanding of the nature P K
of risks related
to project
Minimising the risks for P K
public sector and for
end-users
Diversity features
Added value in core public K K
services
Added value from networked P K P D
services production of
core public services
Diversity of core public P K P
services and service
development
Service and product K K
innovations in core
public services
Customer selection features
Innovations in third party K P K
services
Extra cash flow from third K K
party services
Rise of utilization rate K
Rise of possibility to make K
free choices in public
and private services
Criteria categories Stages of purchasing process
Itemised
evaluation Evaluation
criteria given criteria used
in tendering for decision
Life Cycle approach features material making
Economic features
Overall costs and Net K P F VP D K VP D
Present Value
Financial costs and K P F K
security of finance
Pricing mechanism K F D K D
Residential value of K F K VP D
assets
Juridical features
Requirements of Public
Procurements Act
Juridical competence of
tender
Commitment to the K P K
proposed contract
The legal structure of
the company and it's
shareholders
Quality and technical
features related to the
design and building
Features related to K P F VP D K P F VP D
architectural and
aesthetic values
Usability and K P F VP D K P F VP D
divisibility of space
Internal environmental K P F VP D K P F VP D
quality
Mechanical and Electrical K P F VP D K F D
installations
Sustainability and K P F VP D K F D
materials used
Quality of required core
public services
Quality assurances K K F
Continuance of the
services and competitive
advantage to other
service providers
Quality of the services K K
Service organisation and K P F F
it's experience
Options to research and
development of the used
PPP model
Project management
Implementation K P F K
organisation and it's
experience
Timetable of implementation K P F K F
Security features for work F
safety and environmental
safety
Risk allocation and management
Risk allocation and risk K F K
management
Understanding of the nature K
of risks related
to project
Minimising the risks for
public sector and for
end-users
Diversity features
Added value in core public
services
Added value from networked F
services production of
core public services
Diversity of core public P F
services and service
development
Service and product
innovations in core
public services
Customer selection features
Innovations in third party
services
Extra cash flow from third
party services
Rise of utilization rate
Rise of possibility to make
free choices in public
and private services
Table 3. Customer orientated stages and criteria for evaluation
in the purchasing process for 4P projects
Evaluation stages
Criteria categories Life cycle approach Diversity
Economic features VFM in public core Added value in core
services and in public services
property investment
Quality and technical Design & Build and Flexibility and
features related to maintenance of usability of spaces
property property investment for diversity of core
public services
Public and private Quality of required Service diversion
service features core services and innovative
development
Risk shearing and risk Risk shearing and risk Risks from networked
management features management of property service production
investment and core
services
Evaluation stages
Criteria categories Customer selection
Economic features Added value in third party
services and extra cash
flow
Quality and technical Flexibility and usability of
features related to spaces for diverse third
property party services
Public and private Possibility for free choice
service features in core public services and
innovative development of
third party services
Risk shearing and risk Risks of third party
management features services
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