Let's get past the dogma

I’m obsessed with public-private partnerships (PPPs), and I’ve been surprised to discover that I’m far from the only one. Even people who don't work in infrastructure can have pretty strong views on whether the private sector should own and manage it.

I have friends who say “public-private partnership” like they’re spitting out grass and dirt. To them, allowing the private sector to profit from public assets is not just bad policy — it feels like a moral failure. They worry that PPPs siphon public goods into the pockets of wealthy shareholders and executives, breaking something fundamental in the social contract.

Then I have other friends who go the other way. They’re deeply skeptical of the public sector, convinced it’s too beholden to political pressures and inertia to ever manage major infrastructure effectively. In their view, public delivery means delays, inefficiency, and bloated costs.

Both perspectives have a point. But both also overlook something essential: **the outcomes they fear can happen under either model.**

Take a public agency that’s building a project itself — maybe a wastewater treatment plant or a transit extension — and it’s confident about the budget. It hires a contractor and they get to work. But partway through, things get more expensive than expected. The agency is locked into the project, and the final cost comes in 50% higher than projected (not unusual, unfortunately!). Even if it avoided paying, say, a 12% private-sector profit margin by keeping the work in-house, the public still spent more than it could have in a well-structured private delivery. And where did the extra money go? To the contractor and its suppliers - in other words, to the private sector.

But what about that 12% profit margin the agency was trying to avoid? It’s worth asking: where does it go? Some of it may end up with highly paid executives. But some goes to investors, a major class of which are pension funds who provide the benefits to public sector retirees.

On the other hand, just bringing in the private sector doesn’t guarantee results. Imagine a company that wins a PPP contract with the lowest bid — but it doesn’t actually have the experience to deliver. It under-allocates staff, struggles when prices rise, and ultimately walks away or drags out the project. Or worse, maybe the contract didn't shift cost risk to the private company. The result? The public agency gets burned — not because it brought in the private sector, but because it did so too haphazardly.

The point is: the details matter.

• If a project isn’t that risky, and the public sector has a solid track record and in-house expertise, there may be little benefit to outsourcing delivery.
• Cost of capital matters — but it shouldn’t dictate everything. The preferential tax treatment of municipal bonds often nudges governments toward full public delivery, even when a private model might offer a better risk-reward balance.
• Complex, high-stakes projects can be good candidates for private management, but only if the public agency has a strong process to select the right partner and the contract makes the private company responsible for all the risks it is better suited to manage.

In June, I moderated a panel on this topic at the Grunin Center Conference at NYU Law School, featuring Chris Mann, Steve Park, Allen Farberov, and Gian-Carlo Peressutti — all of whom brought sharp and practical perspectives. A few takeaways stood out:

• The U.S. likely underuses PPPs compared to peer countries, despite their potential to improve outcomes when designed well.
• Tax policies — especially around municipal debt — artificially constrain project structures, pushing governments toward pure public models even when hybrid or private options could be cheaper or more likely to succeed.
• The infrastructure investor group GIIIA has published a thoughtful white paper with suggestions for how to level the playing field and enable more effective PPPs. It’s admirably nonpartisan and well worth reading to get the private sector's perspective.
• Good PPPs are about aligning risk with the party best able to manage it. This can reduce long-term public cost and improve the odds of success.
• Bad PPPs happen when governments are chasing short-term savings or trying to offload responsibility without a plan. Careful procurement and contract design is essential.

It’s also worth noting that PPPs don’t have to mean a complete giveaway. There are ways for the public sector to share in upside — through revenue-sharing agreements, performance-based bonuses, or even equity stakes. But those mechanisms have to be used carefully, or they risk undermining the whole point of transferring risk and accountability in the first place.

So yes — skepticism is healthy. But dogma is limiting. The public-private distinction isn’t a moral question; it’s a design question. And the right answer depends not on ideology, but on the facts: the project, the risks, the incentives, the competence of the players, and the clarity of the contracts.

If we want better infrastructure, we need to get more comfortable living in the gray areas — and get better at making the details work.