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# **Box 5: Public-Private Partnerships in Social Sectors**

Loevinsohn and Harding (2004) review the experience with contracting approaches (mainly management and service delivery contracts) in the delivery of primary health care or nutrition services involving nonprofit organizations. Based on ten studies of mostly low-income countries, they show that rapid improvements were achieved in a variety of services and settings. The four cases with controlled before and after evaluations demonstrated large impact, with the median double differences ranging from 9 to 26 percentage points. Larger double differences were observed for parameters that are easier to change, such as immunization. Six of the ten studies compared contractor performance to government provision and all found that contractors were more effective, both in terms of quality of care and coverage of services. The concern that contracts are unlikely to enable service delivery on a large scale was not borne out: four of the examples involved millions of beneficiaries. In terms of cost, non-governmental entities performed better even when public institutions were provided similar amounts of resources. The programs were sustainable: of the nine programs, seven have been continued and expanded. The one study which examined equity found that contractors were able to significantly improve health services for the poor, actually saved them money, and did a better job than government provision.

Taylor and Blair (2002) review the experience with PPPs in managing and constructing public hospitals. In Australia, federal and state governments have introduced private participation in more than 50 public hospitals through different approaches, including build-own-operate (BOO) transactions, conversions or sale of hospital to a private operator, private management of a public hospital, build-own-leaseback arrangements, and collocations in which a private wing is located within or beside a public hospital. One example with positive results is the Mildura hospital BOO contract, awarded in 1999. Capital costs for the new hospital were 20 percent below those for public hospitals. All performance targets have been met, patient volumes increased by 30 percent in the first year, clinical services are provided at a lower cost, and the operator made a profit. In Sweden, the municipality of Stockholm leased a 240-bed public hospital to a private provider following a series of prior reforms launched in 1994. Since then, unit costs have been cut by 30 percent and the hospital is now able to treat 100,000 more patients annually with the same resources. Taylor and Blair show that PPPs provide innovative ways to control costs and improve service, but they also emphasize that gains are achieved only when policymakers structure the transactions carefully and create sound regulatory arrangements to ensure universal access, quality care, and improvements in efficiency.

LaRocque (2004) reviews the impact of private initiatives in the education sector, an area of limited analysis. Studies in the UK show that private finance initiatives appear to have been successful in delivering public infrastructure in a timely and cost-effective manner. The US experience with contract schools has been uneven, with education management organizations (EMOs) having mixed success. Early studies showed that while they yielded benefits for students in the form of individualized instruction, improved attendance, and greater access to computers, they had little systematic impact on academic achievement. Recent evidence is more promising: one recent study showed that EMO-operated charter schools registered gains in test scores over the 2000-2002 period and significantly out-gained non-EMO charter schools with similar demographic profiles. Evidence on the impact of choice and competition on student performance yields contradictory results: (i) some studies show that students at charter schools perform better than public school students, while others show the reverse; and (ii) competition from private schools improves achievement at public schools, while others show a small or no effect. As in the health sector, experience in education shows that good contract design and a well-designed contracting process are critical to achieving successful outcomes.

S _ource: Loevinsohn and Harding 2004; Taylor and Blair 2002; LaRocque 2004_