Public-Private Partnership and Social Equity: First Ever Empirical Study

Article by Ahmed Sadiq

One of the main criticisms of Public-Private Partnerships (PPPs) has been that they favour large firms over Disadvantaged Business Enterprises (DBEs) or firms that are owned by minorities or women in business. However, up till now, no actual empirical evidence has come up to either support or dismantle that claim.

Research

Hence, just in July of this year, researchers at the University of Maryland published the first-ever empirical evidence that sheds light on PPPs and their relation to Social Equity, and the results have defied expectations (Zhang & Cui, 2021).

In the study, PPPs were compared to two other delivery methods, namely, the design-build method (DB) and the conventional design-bid-build method (DBB). The research sampled 134 federally assisted highway projects across the US and applied linear regression models to determine whether the long-held suspicion of inequity in PPPs is true.

The research correlated expected levels of social inclusion (DBE Overall Goals), expected levels of social inclusion after considering discrimination (DBE Contract Goals) and actual participation of minority groups and women-led businesses (DBE Attainment) with the three types of delivery methods.

The results suggested that as compared to the conventional delivery method of DBB, PPPs attain higher DBE Goals, suggesting that one of the main criticisms that PPPs face may not be valid after all.

The research speculates further into why this may be. One of the reasons stated is that PPP contracts are usually of bigger size and scale. The average amount that is awarded for DBB is $89.1 million, while that of DB and PPPs are $466.6 million and $954.2 million, respectively. This difference in size means that there are more opportunities for subcontracts, which are more likely to be awarded to smaller, DBE firms than prime contracts, and which may enable these disadvantaged firms to get their foot in the door. Another reason stated is that PPPs, since they are larger and more expensive projects, also attract a lot of media and political attention, pressuring the agencies to set higher DBE Goals and complying with them.

The authors conclude by writing, “this study created a rhetoric that contradicts conventional wisdom about P3 (PPP) and could at least provoke a serious discussion about enlarging opportunities for DBEs in P3 contracts” (Zhang & Cui, 2021).

They call for PPP advocates to use the method of delivery to actually promote diversity and inclusivity since it ironically incentivizes these values, rather than diminishing them (Zhang & Cui, 2021).

Healthcare Sector

The question that arises now, is whether the same results could be obtained in a healthcare setting. Empirical evidence here is lacking since this research is still one of its kind, however, analysis of social equity in the healthcare sector is not new.

For example, in 2019, a collaborative initiative between Lean In and McKinsey conducted research for Women in the Workplace where they recognized healthcare to be “one of the best industries for working women on several dimensions,” (Berlin, et al., 2019).

Figure 1. Share of employees who are women in the healthcare sector and in corporate America overall, by percentage (%) (Berlin, et al., 2019).

As figure 1 shows, women in healthcare have a higher representation at all levels when compared to overall corporate America, in the same general setting as the University of Maryland’s empirical study. Further results from the study revealed how for every 100 men getting promoted in healthcare, 102 women are getting promoted as well, the second-highest figure across sectors.

Having said that, there stills remains critical social equity challenges in the sector that remains to be addressed. As figure 1 also confirms, there is a lack of representation of women in senior leadership positions, especially for women of colour. A recent study on the representation of minorities in the healthcare sector of the US also reveals stark underrepresentation (Salsberg, et al., 2021).

Conclusion

This challenge of representation in the healthcare sector is one that more and more companies are working to correct. And even though more research and empirical evidence is needed, most studies conclude that proper legislation, policies and enabling company cultures can have an impact on diversity in the workplace. Now, empirical evidence shows that the PPP modality could be another way to better ensure that social equity is being maintained and that unfair disadvantages are being reduced.

 

References

Berlin, G., Darino, L., Greenfield, M. & Starikova, I., 2019. McKinsey & Company. [Online]

Available at: https://www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/women-in-the-healthcare-industry

[Accessed 7 9 2021].

Salsberg, E. et al., 2021. Estimation and Comparison of Current and Future Racial/Ethnic Representation in the US Health Care Workforce, s.l.: Jama Network.

Zhang, K. & Cui, Q., 2021. Public–Private Partnership and Social Equity: An Empirical Study of the Disadvantaged Business Enterprise Program. Transportation Research Record, pp. 1 – 9.

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