Memorandum of Understanding

An essential tool to “Empower” Public Private Partnership

During the period immediately after independence, in order to overcome the red-tape and indifference in the functioning of Government Departments and to serve the citizen better, several Public Sector Undertakings (PSU) were established all over the country. As they were incurring losses public sector reforms were introduced leading to closure of PSU s in large numbers.

Later over a decade and half ago, when the Indian economy was opening up, several joint ventures were formed in just one year between Indian and foreign companies. Majority of them ended up in breaking within five years later as they failed to produce the expected results. The objective of partnerships, through joint ventures, of making one plus one produce three, could at best be realized in producing just less than two-the reason being ‘cultural’ problems. The development of a comprehensive shared vision, going beyond the financial value of the Joint Venture to surface and match the cultural values of partners was absent then. Thus the experience in India revealed that joint ventures are notoriously difficult to manage.
As against these two bad experiences, in India, as in other countries evolved the concept of “Public Private Partnership” and steadily gaining strength. Through Public-Private-Partnership (PPP), an otherwise government (Public) service is funded by state either totally or partly, and operated through a partnership between government and one or more non-governmental organizations or private sector companies (Private).

In addition, the private sector is perceived to be easily accessible, better managed and more efficient than its public counterpart. It is assumed that collaboration with the private sector in the form of PPP would improve equity, efficiency, accountability, quality and accessibility of the entire health system. Advocates argue that the PPP can potentially gain from one another in the form of resources, technology, knowledge and skills, management practices, cost efficiency and so on.
Partnership is therefore a collaborative effort and reciprocal relationship between two or more parties with clear terms and conditions, clearly defined partnership structures, and specified performance indicators for delivery of a set of health services in a stipulated time period. In other words, the core elements of a viable partnership are beneficence (joint gains), autonomy (of each partner), functional freedom (of implementing partner), joint-ness (shared decision-making and accountability) and equity (fair returns in proportion to investment and effort-need not be in terms of monetary gain).

Non-profit organizations have special concern for reaching the poor and the disadvantaged, but, their sustenance depends on philanthropic donations or external funding. They provide good quality care, need little regulation or oversight from government, are able to attract dedicated staff, and cater to the needs of those otherwise excluded from mainstream health care. Moreover, they are also willing to undertake health care challenges that the for-profit sector is unwilling or unable to take on. Given their non-profit motives and grass-root level presence, NGOs can play useful oversight roles in the system. Their size and flexibility allows them to achieve notable successes where governments have failed. Provision of Emergency Response Services by EMRI is the best example of this.

There is no hard and fast rule that, the governments, to follow in choosing a non-profit organization to partner with it for providing services in PPP framework either in the health sector or in the social sector. Nor there are any standard guidelines in this regard. An expert study on this observed that, except in very few cases where government resorted to open tendering most of the partnerships revealed that the government and the private partner chose to consult each other, formally or informally, before venturing into partnership agreements. In such partnerships, charismatic leadership and vision of the personalities, from both sectors, played a critical role. There were also compelling circumstances and relationships based on trust that were critical in triggering partnership initiatives. Either the government may approach the private organization or the private organization may work hard to convince the political and administrative leadership in the government for finalizing PPP.

Several analysis and studies suggest that a competitive process of selecting the private partner for PPP framework is less effective than an invited or negotiated partnership. While competing to win the deal, the private partner’s primary concern is to quote less to become the lowest bidder whereas the government side officials’ main concern would be to meet procedural requirements than meeting beneficiaries’ needs. Tendering process in government is adapted to choose the lowest bidder. Though it is economical initially, the trend later would be up-ward revision of costs and if government disagrees, then the level of quality and effectiveness comes down. Resorting to transparent and competitive process may be useful for commercial projects but not in social sector where reaching the poor is a priority rather than pricing of services. Hence either prior negotiations with the potential partner or a tender where eligibility conditions are tailor-made or the prior experience of the private partner to be used as a basis for choosing is ideal for the success of PPP.
It is often observed that partnerships are formed between organizations but succeed because of individuals who are strong leaders and who champion the partnership projects with vision, energy and enthusiasm. Partnerships work typically with one providing the financing and the other providing the services.

Typical enabling conditions identified worldwide for the success of PPP are: a clear understanding between the partners about mutual benefits, a clear understanding of the responsibilities and obligations between the partners, strong community support, need for some catalyst to start the process of partnership, stability of the political and legal climate, regulatory framework that is followed and enforced, capacity and expertise of the government at different levels in designing and managing partnership and so on. Public Private Partnership is different from privatization and the message has to go without ambiguity. Partnership is not meant to be a substitution for lesser provisioning of government resources nor an abdication of Government responsibility but as a tool for augmenting the services.
This entails a paradigm shift in the role of the government from provision of services to partnering with a private non-governmental organization in making available these services, through a meaningful arrangement popularly known as “Memorandum of Understanding”. Such arrangement is referred as an essential tool to “Empower” Public Private Partnership (PPP).

PPP however would not mean privatization of the sector. Partnership is not meant to be a substitution for lesser provisioning of government resources nor an abdication of Government responsibility but as a tool for augmenting the emergency response services.

For the first time and as the first of its kind(PPP) model any where in the country-may be in the world-Emergency Response Services were introduced and implemented in PPP in Andhra Pradesh with Emergency Management and Research Institute (EMRI) as Nodal Agency to cater to each and every citizen in the state free of cost. Within three and half years the model is replicated in eight more states and the day is not far off when the whole of India will have a similar service. The success of this PPP will however depends on the preparedness and commitment of respective state governments as well as EMRI in adhering to the provisions of MoU in letter and spirit failing which it is the poor citizen who is the sufferer. Then only it can be called as Empowerment of PPP through MoU.