The role of informal relationships in strengthening partnerships between public and private sectors

Abstract

The relationships between public and private sectors are considered to be significant contributors to the success of PPP projects. These include both tangible linkages, as through the parties' contractual agreements and also intangible connections as through informal relationships that develop between the parties. Semi-structured interviews with a senior public sector officer, a private company managing director, and a financier revealed wide differences in views on the role of informal relationships in building partnerships between PPP participants, especially between public and private sector. The public officer insists that informal or personal relationships have little influence on the entire PPP project. On the other hand, the private sector senior manager thinks informal relationships are significant and can even influence the formal selection of the private partner, whether consciously or otherwise (and even without any unethical intentions). The financier has a neutral view on the role of informal relationships, in that he thinks relationships in PPPs are important, but that does not really commit so much in terms of personal or informal relationships. This paper reports on the contribution of informal relationships to the success of infrastructure PPP projects based on an international questionnaire survey that followed the above interviews. It also unearths some potential reasons why different PPP participants from different subsectors/groups presently hold different views on the role and contribution of informal relationships to strengthening PPPs. This in turn leads to suggestions for innovative approaches to reinforcing the formal with informal relationships; rather than merely focusing on the former, e.g. in attempts at fine-tuning contractual and organizational arrangements, while neglecting the potential benefits from informal relationships.