Public Private Partnerships

Public Private Partnerships

The Worldwide Revolution in Infrastructure Provision and Project Finance

Darrin Grimsey and Mervyn K. Lewis

This path-breaking book considers the recent trend for governments to look increasingly to private sector finance, provided by private enterprises constructing and managing public infrastructure facilities in partnership with government bodies.

Chapter 3: The Origins of Partnerships

Darrin Grimsey and Mervyn K. Lewis

Subjects: economics and finance, financial economics and regulation, public finance, public sector economics


INTRODUCTION This chapter mainly is concerned with the increased involvement in recent years of the private sector in the provision of infrastructure-related services. Our particular focus is on the variety of forces that lie behind and have come together to underpin and to inform this trend. Here we refer to the ‘new public management’ agenda, dissatisfaction with traditional procurement methods and the development of the private financing model, and the conceptualization of ‘partnering’ as a management process. But we begin with history, for there is a rich tradition of private sector investment in infrastructure. It is important to understand this history, and why so many of the projects come to grief, in order to appreciate the special risks that infrastructure investment poses to private entities. Many people would think of the ‘railway mania’ of the mid-nineteenth century as the grand era of private sector involvement in infrastructure investment, and with good reason because the railway construction boom ‘overshadowed all other economic developments of the period’ (Briggs, 1959, p. 296). Some idea of the extent of private activity in this infrastructure sector can be discerned by the calculation of Thomas Tooke, the Victorian economist, that at the height of the railway construction boom in Britain in the late 1840s, as many people were employed in railway construction activities as the total population engaged in factories in the whole of the United Kingdom at that time (Court, 1962). In addition, railway construction in Britain was soon followed by the construction, using British...

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