PPPs for Smart and Resilient Cities

Due to high rates of urbanization in the emerging economies and aging infrastructure in North America and Europe, city governments are facing logistic and financial challenges in delivering services and infrastructure that will ensure a sustainable high quality of life for their inhabitants. City leaders are in addition, facing greater public expectations from urban dwellers that services and infrastructure should be smart, resilient, and sustainable. In many countries, national government have made further commitments to meet international development and climate targets, such as the Sustainable Development Goals (SDGs), which have added an additional burden on city managers who are tasked with delivering infrastructure and services that meet elevated quality and sustainability goals.

Consequently, urban planning is undergoing a revolution that requires smarter approaches to design, build, financing, operations and maintenance of new infrastructure and services. “Smart cities” has entered the everyday planner’s lexicology with a wide range of meanings attached to what smart – and increasingly resilience – means. The definition of what constitutes a smart city varies from country to country and even within countries. Is it a concept that envelopes the whole fiber of a city, or only parts of it? Is it a city that is purposefully built to serve a specific function? Will it bridge the gap between the rich and poor? What are it hidden secrets? Will it be as dystopian as the city portrayed in Fritz Lang’s 1927 movie Metropolis?

The wide range of definitions can be confusing and distracting. When one explores the current literature narrative for a description of what metrics constitute “smart” planning the following emerges;

• An adoption of new interactive technologies that enhance the operation of a city
• The application of technology and participatory practices that improve access to resources, human and social capital, and quality of life
• The adoption of a series of strategies that make cities more livable
• The active participation of all stakeholders in decision making that improves access to needed infrastructure and services
• The embracement of critical and holistic implementation approaches, that are based on sustainability and good governance
• The section of appropriate infrastructure and processes that put people putting people first
• Choosing the right partners
• Balancing goals of technological innovation with cost (affordability) and sustainability (practicality)

The implementation of these objectives and the achievement of goals is not without cost. The financial investment demands are in most instances beyond the reach of the public sector on its own. As a result, government agencies are leaning towards closer partnerships with the private sector and stakeholders to reach an equilibrium between infrastructure cost, service delivery and sustainability criteria that meet a trifecta of relational expectations that include the following:

• Bridging the financial and technological innovation gap that exists between the public sectors capacity to deliver and the greater public’s expectations
• Meeting the increasingly complex technological needs of the private sector for an operational milieu (or context) that is entrepreneurial and sustainable and which provides the supporting infrastructure needed by modern economies to grow sustainably
• Accommodating the quality of life needs expectations of their citizens

Globally, the increasingly educated middle class inhabitants of cities who have more disposable incomes are becoming more vocal in their demands that services be not only smart, but also sustainable and resilient. Many of these citizens live in cities that have expanded faster than their ability to provide an acceptable level of service and which are facing a sustainability and resilience crises.

This has required a mindset change by public authorities who now face stakeholders that are holding them to new standards that require city government to be entrepreneurial and receptive to the latest technological innovations. This also requires that city leaders create enabling environments that promote public –private partnership (PPPs). This has resulted in an increasing pragmatic openness to collaboration with the private sector to build smartly. Cities are seeking ways to meet resiliency goals through management and operational practices that are leaning toward PPPs. In these partnerships policy changes are allowing delivery roles to be changed where private companies are increasingly being allowed to operate and provide key infrastructure and services. Typically, for PPPs, this is resulting in partnership agreements that are contractually binding and long-term in nature (+20 years).

The benefits of formalized partnerships - through PPPs - cannot be discounted. However, the approach to “smart cities” requires visionary insight, meticulous planning, and clear understanding of the city context.

There are two emerging “smart city” classes that require differences in approach and selection of appropriate PPP models. 

In existing cities where smart planning initiatives are being launched, brownfield "smart city"projects are more typical with greenfield projects being woven into existing city infrastructure fabric. The required retrofitting and revitalization of infrastructure, requires careful accommodation of the old and new. Brownfield PPPs can be alluring, but they can have hidden risks that can rapidly undermine the bankability of projects. Factors that should be considered include: the difficulty of harmonizing existing antiquated infrastructure with new technological demands, political support for change, environmental concerns, property rights of existing inhabitants, and historical constraints. There is also a probability that projects selected for PPPs are more likely to be service type projects that are focused on improving delivery through operation and maintenance agreements. In these cities, a dialogue is required between visionaries and the existing city population to ensure success.

On the other hand, greenfield “smart city” projects have their own challenges. In many emerging economies, there seems to be an enthrallment with planning and constructing purpose built technologically smart sustainable cities. These include medical cities, academic cities, science and technology cities, and export and free trade zones. The “tabula rasa” presented by planners of these initiatives can be very alluring. The biggest attraction is being able to design – from scratch – a sustainable and holistically resilient city that is unencumbered by existing and decaying infrastructure. However, greenfield “smart city” projects have specific challenges that have to be mitigated to ensure that they have a strong rationale for their existence and do not become soulless and characterless expressions of well-meaning, but na?ve developers. In the absence of an existing community a new leitmotif has to be established that will be alluring to investors and future inhabitants. It is not uncommon that high land values result in greenfield “smart city” projects being built in areas that are removed from existing population centers. The advocates of these new cities have to creates a city bureaucracy – in a vacuum - that will create a compelling reason for the cities’ existence and assurances that the city can be built and managed sustainably. These new management bodies typically seek partnerships with the private sector, through special purpose vehicles (SPVs), that will drive the visionary project forward. This is an management area where private sectors can play a primary role in partnership with an emerging public sector to ensure success.

One of the biggest concerns is that governments can have unrealistic expectations of their role in “smart developments.” Instead of focusing on creating an enabling environment, they can become demanding partners that have the potential to suck out the financial blood of the projects. This can easily drive away investors who are cautious about excessive interference in the management and operations of projects that have to be assured of a financial return. A fine balance is required between the partners when it comes to “smart” projects that require hundreds, if not billions of dollars of investment that is risk prone.

Partnerships between the public and private sector to develop “smart cities” have a great future if relationships are built upon realistic expectations.

PPPs can add value to "smart city" projects by:

• Expanding access to financial resources and capital without increasing local government debt
• Introducing public management and governance benefits
• Ensuring project viability, bankability and Value for Money (VFM)
• Enforcing procurement transparency and cost identification
• Transferring project risk to the party that is more capable of managing and mitigating risks
• Evading political interference through a long-term contract commitment
• Building institutional capacity of participating partners so as to ensure projects sustainably
• Fostering innovation that improves the efficiency of services and assures sustainability
• Promoting economic development through best practices that positively empower stakeholders and city inhabitants

PPPs are hard work and require comitment, financial investment and sound operational plans. To build sustainable infrastructure, only affordable projects should be considered.  To ensure that the PPP models that are chosen are appropriate, requires due diligence and Value for Money (VFM) assessments. This is politically expedient as resources that need to be mobilized through PPPs are expensive. In addition, expectations need careful management or the benefits of PPPs could rapidly wane if inappropriate models of delivery are chosen. This requires careful introspection by all partners and stakeholders when planning a smart and resilient city strategy. Factors that should be considered include the following:

• Determining the decision threshold pre-requisites for “state-of-art” technology and its affordability. There are times that the latest technology might be too expensive or untested and which could result in sustainability goals being missed (e.g. What is appropriate for New York City might not be appropriate for Mumbai)
• Accepting that decision making and planning can be time consuming and that there are no shortcuts
• Determining whether cities planning objectives are really focused on resiliency or whether they are being built as showcase cities that are more focused on prestige
• Assessing the needs of what it makes to make a city smart and resilient. There is no model that fits all cities. An emerging economy city that has access to water, affordable housing, power, improved roads, and basic telecommunications technology for the first time will most certainly increases its resilience and sustainability than a city in Europe that builds a new state-of-the-art metro system, just because it can
• Ensuring that delivery metrics are developed that capture smart and resilient goals
• Prioritizing the infrastructure and service needs of a city, especially when considering cost and returns on investment
• Ensuring that the project size is appropriate. Projects that are too small might not be appropriate for PPPs due to transactional costs, for example
• Balancing the expectations of the private sector with that of the city inhabitants
• Ensuring that a clear process is in place when it comes to determining the approach to unsolicited proposals that the private sector might present to a city administration (is it in the interest of the city as a whole, and is it going to provide the best value for money?)
• Recognizing that the age, and development and population density of a city requires different contextual considerations for projects that might be greenfield projects versus brownfield projects
• Ensuring that all parties understand what PPPs are and that all stakeholders buy into the project
• Understanding how the private sector operates and what its expectations are
• Ensuring that the budget exists for what is being contemplated

PPPs are a good tool to use for the development of "smart cities." They need to be understood and PPP models need to be chosen appropriately. Both the public and private sector need each other to develop “smart cities.”

Should you wish to know more about PPPs, please feel free to contact me at [email protected].

Reference Resources:

100 Resilient Cities – www.100resilientcities.org

Eva Bufi: Public Private Partnerships for Sustainable and Smart Cities - PPP for CITIES, Specialist Centre on PPP in Smart and Sustainable Cities

Smart & Resilient Cities - www.smartresilient.com

Uraia: Public-Private Partnerships for SMART City Management: Recommendations for local governments to prepare and implement SMART PPPs