¢¢ Ensure transfer of skills. SMART projects require high level management capacities. The contract shall mention the transfer of skills from the private sector to public officials, to avoid dependence of the public entity on the skills of the private partner. In short, the public entity should be capable to manage the project on its own after the termination of the contract. ¢¢ Ensure a good distribution of the responsibilities in terms of management and maintenance of the project and the infrastructure on the long-term. This is particularly relevant for SMART projects that may lack precedent on maintenance requirements in terms of costs and technical capacities. Negotiating the contract. Local governments and the public sector in general are often less well prepared to negotiate the terms of reference of a PPP due to a misbalance in capacities between the private and public sector. Therefore, and in order to guarantee the success of the negotiation, local governments have to engage in trainings and learn from past experiences, and their peers to strengthen their contract negotiation skills. It is also essential to prevent dependency from the private sector by ensuring autonomy and finding alternatives, such as collaborations with civil society organizations or local entities. An additional element to guaranty the success of the negotiation is building reliability and trust between partners. This is only possible if both parties are willing to engage in a transparent, open and honest dialogue and a long-standing partnership. Sharing the strategic plans and missions, goals and objectives openly with the private company is one way of enhancing trust. Organizing the meetings in neutral ground might also improve communication between parties. Challenges, risks and pitfalls when dealing with the private partner. All too often, misunderstandings and a lack of knowledge on the management and working culture, constraints and capabilities of the partner lead to conflicts that may impede the signing of the contract. In fact, the private and public sector often do not ‘speak the same language’, for which they have to engage in a process of exchange and dialogue, identify common interests, strive for win-win situations, and in some cases, refer to intermediaries in the negotiation process. Reinforcing negotiating skills. One way for the local government to avoid difficulties with the private sector is to be sure about what it wants and what the company can offer: for instance, when the city owns the intellectual property rights, has developed its own innovative products and approaches the private sector with a clear idea and demands, it strengthens its negotiation power. On the contrary, the municipality may lack negotiation power when the private sector comes with a “ready to use solution” that does not necessarily adapt to the local context and does not allow for the local government to keep control over the product.
“In Portugal, PPPs are very common. In fact, they contributed to the financial crisis. It is therefore crucial to carefully analyse the risk and rewards of PPPs, since in some cases the local government takes over the risk, while the private sector is transferred the reward. PPP negotiations must lead to a situation where risks are equally shared among both parties”
Carlos Sousa Co -founder and Global A lliance Vice President, Change tomorrow, Portugal
“Establishing long lasting trust between the public and private sector is essential to guarantee the success of the partnership.” X avier M aitrerobert Business, Development and Cities Direction, Veolia, France
“The notion of partnership is central. Local government and private sector must understand that they are at the same level, that it is a win-win situation and not one where one partner has all the solutions and the other has to learn everything.” Edoardo Calia Deputy Director for Strategic Programs, Instituto Superiore M ario Boella (ISMB), Italia
“It is important that the local government engages in a balanced partnership, creating a win-win situation and not a situation where the municipality is demanding and the private partner provides the solutions. For this reason, Mexico City opted to develop in some cases its own projects in collaboration with the civil society. In this way the city makes proof of independence, creativity and autonomy from the private sector.” Oliver Castañeda General Coordinator of A dministrative modernization and head of the unit for regulatory improvement,
PHASE 2 NEGOTIATING THE PARTNERSHIP
M exico City, M exico
PUBLIC-PRIVATE PARTNERSHIPS FOR SMART CITY MANAGEMENT
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