COURSE WORK

Course Work



Course Work

Introduction

Public service can be defined as any service provided for society in areas where there is the potential market failure justifying government involvement (Grout and Stevens 2003). Nowadays, providing public services is a subject of many debates in which activities are carried out only by public organization, and it focuses on the role played by the private sector in this provision. Since governments around the world strive to offer first-rate public services to their citizens, they are seeking how they can get sufficient benefits from the private sector as much as possible. In this case, one of the most affluent countries is the United Kingdom, where the participation of private sector in the provision of public services has grown. Tim Jenkinson's analysis on this issue indicates that the main driver behind developing UK economy in the preceding years is attracting private sector to public services provision effectively (Bettignies and Ross 2004).

However, the involvement of private sector to public services has brought some disputable questions with itself, as well. One of these problems is identifying whether the ownership of physical assets has an impact on the cost and quality of public service. Szymanski (1996), Domberger and Jensen (1997) investigating refuse collection in UK came to the conclusion that there is no difference in the costs between the public and private ownership, and the factor creating the difference is competition rather than ownership. In contrast, Hart, Shleifer and Vishny (1997) comparing contracting out and in-house provision pointed out that private ownership causes cost reductions at the expense of the quality. Similarly, Besley and Ghatak (2001) research on this issue indicates that ownership issues can create vast differences and ownership should lie with the party who cares public benefits of the services. In my essay, I will try to support the latter point and demonstrate the main reasons for the difference.

PPPs

Since 1980s, the new wave of privatization has begun; however, it was different from traditional privatization of public organizations. Instead of full privatization, government retains a central role in procurement and as the main purchaser of the public service. The physical assets are designed, built and operated by the private sector and government stands only for the purchaser of the service. It is called public-private partnership (PPP), and this terminology is used by most international organizations today. PPP is a long-term service contract between the public sector and private partner, where the former pays for the delivery of the service over a long, specified period (Valila 2005).

The participation of the private sector in public services provision is a necessity rather than choice, and there are some quite beneficial features of such partnership. First of all, PPPs allow the government to spend saved money on other budget items. Secondly, in PPPs the final construction price exceeded agreed at the contract is considerably low. For instance, in 2003, under the traditional procurement the final prices surpassed the contract price in 73% of the projects, while this ...