Public Service Concessions and PPPs come home to roost

They call it Renationalization. when a Government takes back the contract for public infrastructure pr public services from the private provider, but the more appropriate concept is Reversion back to the Public Sector, who always retains ultimate responsibility for public service provision. 

After all, that's why it's called Public Infrastructure and Public Services. 

According to Prequin, a specialist newsletter,  the UK's failing TransPennine Express recently became the fourth railway contract since 2018 to be taken back by the British government.  Other problems such as sewage discharge scandals and unaffordable  energy prices have fueled user insatisfaction to be expressed by voters.  

Since the Public Sector is ultimately responsible for roads, passenger transportation and utilities, the proper word to use is Reversion, not Renationalization.  Most PPP and concession
contracts have clauses providing for this. 

Public services must meet three performance indicators:  (1) coverage of the target population, (3) quality of service and affordability and (3) economic and financial sustainability balanced all around, for the users, for the shareholders of the company and  for the Government budget and the taxpayers.  Any serious shortfall in these three performance targets can lead to premature Reversion to the public sector, usually at a significant cost to the taxpayers. 

From where I stand, I suspect that many of the service quality shortcomings have to do with lack of investment in staff training, and excessive reliance on outsourcing to non-specialized service providers. The call centers currently in fashion seem to be staffed by assistants who know less about electricity than most housewives!  

Gone are the days when the customer could rely on one sector specialist to steer HER to the most convenient utility contract.  Add the bane of the Bots, and Regulators would have dozens of complaints, if the Regulators provided a proper online digital complaint window.  

Since most public service providers, public or private, continue to be quasi or absolute monopolies, public service customers have little recourse. 

Until the time comes to change hats, from customers to voters at election time. 

Mariana Abrantes de Sousa 

Economist and PPP Specialist, Portugal 

24-Maio-2023