The Case for a Public/Private Partnership

Article excerpt

Can private sector incentives help improve our federal buildings?

In March of this year, the General Accounting Office (GAO) issued its report, "Federal Buildings--Billions are Needed for Repairs and Alterations" (GAO-GGD-00-98). Sounds pretty grim. This is not a new situation. In May 1991, GAO reported that federal buildings suffered from years of neglect and that about $4 billion was needed to bring some of these buildings up to acceptable quality, health, and safety standards. It's time for a change, wouldn't you say?

Here is my favorite story about how private sector efficiency motives can drive what is perceived to be a public mission to a swift conclusion.

Donald Trump and the Wollman Memorial Skating Rink

The Wollman Memorial Skating Rink in Central Park was badly in need of repair in the late 1970s. After several years of preparation and planning, the New York City Parks and Recreation Department closed down the rink in 1980 for a rebuilding project scheduled to take two years and cost under $5 million. The project involved dismantling the old surface, then installing a new network of coolant pipes and pouring concrete over them. But for reasons that two subsequent studies failed to fully explain, the work went badly. Midproject delays left the coolant pipes exposed to the elements for a year. When the concrete was finally poured there was not quite enough, and the last batch was diluted to finish the job. The coolant system subsequently developed leaks, for many possible reasons I won't go into here. After spending six years and $12 million on the job, the city found that the work to date was essentially worthless and that the job would have to be completely redone.

Donald Trump wrote to Mayor Ed Koch in May 1986 to express his amazement at the city's failure to accomplish so simple a task during six years in which Trump had built several major Manhattan projects. Trump offered to rebuild Wollman Rink himself, at no profit, as a goodwill gesture to the city, and, he added, so that his young son could ice skate in the park before he grew up. The capital projects director for the Parks and Recreation Department conceded that Trump possessed advantages over his own agency, which was "bound by the city's rules and regulations and checks and balances." The city had to follow certain procedures for selecting contractors; Trump could choose on the basis of reputation. The city had to take the lowest bidder that met the literal terms of the contract; Trump could consider aspects of quality beyond contractual specifications. If a city contractor performed well the city could only reward him with the agreed-upon fee and a thank you. Trump could offer bonuses pegged to performance and promptness. If a contractor failed to deliver, the city could only threaten to sue for the return of progress payments; Trump could make it clear that any firm hoping for future work in his far-flung organization had better deliver on the Wollman job. Trump declared "I'm going to get good contractors and push the hell out of them." And he did. The Wollman Rink reopened months ahead of schedule and 25 percent under budget. What the city had been unable to do with six years and $12 million, Trump did in three months for $2.3 million.

Impediments to Partnering

Five years ago, when I worked on the Privatization and Financial Management Team at the National Partnership for Reinventing Government, our team visited the Public Buildings Service of the General Services Administration (GSA) to tell them about public/private partnership structures used to dispose of assets at the Resolution Trust Corporation. These were real partnership agreements, not just some form of contractual profit-sharing arrangement. Government assets were placed into a trust, which was owned by the partnership. The government was a limited partner and therefore had no voice in the management of the assets, but any losses were limited to the imputed value of the government's partnership interest. …