Public Private Partnerships: Panacea for the financial crises of the public budgets or a risk factor?

Public private partnerships (PPPs) have become increasingly popular in Germany in recent years. The breadth of PPP projects extends from federal highways to schools, administration buildings, hospitals, swimming pools etc. Does this model lead to an optimisation of costs and profits or is it a risk factor for the public sector? Gerold Krause-Junk, University of Hamburg, sees PPPs as a way of easing the conflict between efficiency and distribution goals: "The allocative task is then to a large extent left to private suppliers or to those that apply market-economy strategies. The state retains its distributive tasks." For Frank Littwin, Ministry of Finance of Northrhine-Westfalia, PPP projects are no panacea and provide no major contribution to budget consolidation, but they do offer much more cost transparency and promote free-market decisions. And last but not least they are an important instrument for the modernisation of the public administration. Dietrich Budäus and Birgit Grüb, University of Hamburg, point out the problems associated with measuring the efficiency of PPP projects. And for Lars P. Feld and Jan Schnellenbach, University of Heidelberg, whether PPPs make financial sense or not depends on the details of the co-operation. The public sector in particular should take its long-term follow-up costs into consideration when it seeks co-operation partners in the private sector.