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Origins
Origins
Pressure to change the standard model of Public Procurement arose initially from
concerns about the level of public debt, which grew rapidly during the
macroeconomic dislocation of the 1970s and 1980s. Governments sought to
encourage private investment in infrastructure, initially on the basis of
accounting fallacies arising from the fact that public accounts did not
distinguish between current and capital expenditure.
Although the idea that private provision of infrastructure represented a way of
providing infrastructure at no cost to the public has now been generally
abandoned, interest in alternatives to the standard model of public procurement
persisted. In particular, it has been argued that models involving an enhanced
role for the private sector, with a single private sector organisation taking
responsibility for most aspects of service provisions for a given project, could
yield an improved allocation of risk, while maintaining public accountability
for essential aspects of service provision.
Initially, most public-private partnerships were negotiated individually, as
one-off deals. In 1992, however, the Conservative government of John Major in
the United Kingdom introduced the Private Finance Initiative (PFI), the first
systematic program aimed at encouraging public-private partnerships. In the 1992
program, the main focus was on reducing the Public Sector Borrowing Requirement,
although, as already noted, the effect on the public accounts was largely
illusory. The Labour government of Tony Blair elected in 1997, persisted with
the PFI sought to shift the emphasis to the achievement of "value for money"
mainly through an appropriate allocation of risk.
A number of Australian state governments have adopted systematic programs based
on the PFI. The first, and the model for most others, is Partnership Victoria.
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