SINGAPORE: The early termination of the Sports Hub public-private partnership (PPP) has sparked renewed discussion on whether such partnerships are suitable for providing public services with social aims.
National agency Sport Singapore (SportSG) announced on Jun 10 that it would be taking over the ownership and management of the Singapore Sports Hub from Dec 9. This will terminate the PPP with private sector consortium SportsHub Pte Ltd (SHPL), which had been planned to run from 2010 to 2035.
Yet, SportsSG CEO Lim Teck Yin said that it is not correct to conclude that the PPP had failed, on the basis that the right to terminate had been built into the agreement and that the evolving context made it “the right time to do this”.
However one wishes to characterise the Sports Hub PPP, it is clear that innovation, so important for progress, does not always work out.
What is key is to learn quickly from experience and pivot to more effective ways to meet public needs. It is also important not to tar all PPPs with the same brush, but to understand the specific conditions that make it more likely or not for a PPP to succeed.
WHY A PUBLIC-PRIVATE PARTNERSHIP WAS SOUGHT FOR THE SPORTS HUB
Singapore’s principal motivation for PPPs has been to tap on private sector expertise for innovation and efficiency in projects that the public sector pays to use. Since their systematic introduction in the United Kingdom in the 1990s, PPPs have gained traction in many countries for projects spanning transport, utilities, schools, hospitals and even prisons.
Beginning in the early 2000s, Singapore pursued PPPs to develop desalination, NEWater and incineration plants, as well as social infrastructure, notably the Institute of Technical Education (ITE) College West and the Singapore Sports Hub.
For example, Singapore’s Jurong Island desalination plant, officially opened in April, leverages the strengths of a private consortium formed by two companies – ST Engineering provided expertise and design innovation for greater energy efficiency, while the plant derives synergies from co-location with Tuas Power’s power plant.
For the Sports Hub, it was thought that private-sector networks would be key to unlocking value by bringing in major sporting and entertainment events, to maximise utilisation of the facility. Of course, one possible model was for the government to build the Sports Hub and then engage event management companies to run the programming.
But that would not have allowed for upstream involvement of stakeholders to share the risks and optimise the design to make it fit for their purposes. Sharing project risks between the public and private sectors is often seen as instilling financial discipline as the private operator has an incentive to ensure the financial viability of the project.
This was a highly ambitious project. As the world’s largest integrated sports infrastructure PPP project, it stood in contrast to the many cookie-cutter building projects typically put through PPP in other countries.
Besides the significant capital needed and complex build requirements, the project involved service providers spanning different business sectors, such as retail, catering and commercial rights, making this a particularly complex undertaking.
DID SOCIAL AND COMMERCIAL OBJECTIVES DIVERGE TOO GREATLY?
The PPP appeared to have paid off in some ways, as the Sports Hub succeeded in bringing in high-profile events such as the Women’s Tennis Association finals, becoming the first city in Asia-Pacific to host the prestigious tournament. Other prominent events held at the Sports Hub included the HSBC World Rugby Sevens series and concerts by global superstars, like Madonna, Coldplay, Jay Chou and BTS.
But the main sticking point seems to have been the availability of the facility for local and community sporting events. In announcing the takeover, SportSG said the move would give it greater control and flexibility, and there are plans to make it more accessible to the broader community for sports and other social uses.
The natural question is whether SportSG’s vision could have been achieved under the PPP. SportSG’s Mr Lim referred to “contractual limitations” that stand in the way of unlocking the full value of the Sports Hub for the community.
Here is where the commercial objectives of the private consortium may be in tension with the public objective of promoting a sporting culture in Singapore. As former Sports Hub CEO Oon Jin Teik commented, it has been challenging to find the balance between profitmaking and providing a public service.
CAN THE PPP MODEL WORK FOR PUBLIC SERVICES?
Profitmaking is not incompatible with public service delivery if the incentives for the private operator are aligned with public aims, whether this is achieved through the revenue model or regulatory supervision. For PPPs, incentive alignment is all the more important given the long tenure of contracts and the need to respond flexibly to end-user needs.
A PPP may be likened to a marriage, given the long-term nature of the contract. It needs mutual understanding, good communication and a spirit of give-and-take. Not everything can be spelt out in a contract nor can every eventuality be foreseen, so flexibility should be built in where possible.
What is clear from Singapore’s experience is that some factors make it more likely, or otherwise, for a PPP to succeed.
In the case of the NEWater plants, private sector capabilities and business synergies helped to achieve cost efficiency. Where output is standardised and easily monitored, and the underlying technology is stable, PPP contracts are better able to regulate private service providers and ensure that public needs are well catered for over the long haul.
In contrast, changing technology and end-user needs require frequent re-negotiations between the public agency and private sector partner, which may prove challenging even with the best of intents.
Cases like the Sports Hub suggest that PPPs may be less well-suited for social infrastructure where commercial and social objectives diverge, and where even contractual flexibility may not be able to meet ever-changing user needs.
It is noteworthy that following the development of ITE College West through PPP, ITE chose to develop College Central via traditional procurement instead.
Looking back, the scale and complexity of the Sports Hub project suggested that it was always going to be an uphill climb to balance the needs of all stakeholders. The parting of ways between SportSG and SHPL will give the Sports Hub the opportunity to reset and refocus on its core social mission.
This is one of several instances where the public sector has changed course decisively upon assessment of the situation and outlook. In this way, implementation informs public policy even as policy directs implementation.
Terence Ho is Associate Professor in Practice at the Lee Kuan Yew School of Public Policy.