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CUSTOS*
DOMINIQUE
Public-Private
In U.S.
law,
Partnerships!
partnership"
is a
term that
began to be used in the late 1990s and early 2000s in twodistinct but
senses.
related
In both cases,
in which
the private
contracts
than has been customary in thepast for the delivery of the services
contracted
for. With
to transportation
respect
infrastructure,
such as
such
as Operations
and Maintenance
by which
Build-Finance-Operate-Maintain,
the government
or Design
is able to
public
infrastructure
to recoup their costs
to private
through
upgrading
and
maintenance.
By
extension,
such
and prisons,
including
things as schools
care, and even the administration
of state welfare
rescue of the economy. In neither case are the
and financial
is an extensive history of
types in question
really new. There
services,
of health
provision
programs
contract
such use of government
both with respect to transporta
contracting,
tion infrastructure and more broadly. But the use of the term "public
a new enthusiasm
to symbolize
appears
private
partnerships"
for
In
both
this extensive use of
cases,
privatizing
functions.
governmental
out raises
law questions,
both with re
contracting
important public
spect
to the ways
in which
the enthusiasm
for contracting
out has
led
555
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All use subject to JSTOR Terms and Conditions
556
the
american
journal
of comparative
law
[Vol. 58
and with respect to theways inwhich existing law fails to ensure that
public
values
and
the use
In recent years,
in such
out.
contracting
partnership"
(PPP) has become quite common to describe ways inwhich the state
relies
on private
actors
of government
instead
to deliver
employees
and
private
action
raises
a host
of legal
issues.
This
on U.S.
report
law governing PPP and the issues raised by that law is divided into
three parts.
The
first section
discusses
and
terminology
definitional
to PPP.
The
second
section
focuses
on defects,
in the
not
law and legal models we presently have, but rather on the way in
which
the political
and financial
pressures
to attract
contrac
private
tors for types of PPP have led to a tendency toweaken some of the
law provides
that existing
for the government's
protections
as a contracting
or
for a more broadly defined public
party
interest
interest.
section will
law. The
show how
current
the kinds
there
I.
A.
and History:
Terminology
New
Name,
Phenomenon
Old
two reasons.
The
first one
relates
to the polysemous
nature
of the
have
strong American
roots whether
it is in urban
litera
governance
Copenhagen
Business
School,
International
Center
for Business
and
Politics,
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2010]
PUBLIC-PRIVATE
557
PARTNERSHIPS
championed
since
1992,4
and which
more
recently made
global
spread.5
different
in the several
states. Moreover,
has
Congress
enacted
variety.
Partnerships
Pierre,
3.
ed., 1998).
Pauline
Rosenau,
Governance,
Public-Private
and
European
Policy
American
Partnerships
Experience
54
in
(J.
(2000).
4. Australia and the U.K. pioneered forms of PPP under the name "private fi
nance initiative" (PFI).
5.
Darrin
Infrastructure
and Mervyn
K.
Grimsey
and Project
Provision
Lewis,
PPP, The Worldwide
Finance
(2004).
in
Revolution
names
are:
infra n. 45. Other
or "facility concession
agreements."
this case,
the expected
uniformity
See
agreements,"
In
8.
"concessions",
concerns
"leases",
a
particular
"development
sector,
transportation.
road
9. The 2000 revision of theModel Procurement Code forState and Local Govern
ment (2000 MPC)
incorporated PPP-types of public contract. With regard to
infrastructureprojects, in 2007, the ABA published, the 2007 Model Code forPublic
InfrastructureProcurement ("2007MC PIP"), a condensation of the 2000 MPC. Patri
cia A. Meagher, News from theChair, 43 Procurement L., Spring 2008, at 2.
10.
See
infra
text at nn.
69-72.
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All use subject to JSTOR Terms and Conditions
558
THE AMERICAN
JOURNAL OF COMPARATIVE
LAW
[Vol. 58
Service
Functions
as a "contractual
The GAO
defined a PPP
agreement
broadly
sector partners,
and private
which
allows
formed between
public
more private sector participation
It went on to
than is traditional."12
involve a government
that "the agreements
agency
usually
explain
contracting
with
a private
company
to renovate,
construct,
operate,
and
From
a PPP
technical
the GAO's
(e.g., design-build-finance-operate-maintain)."13
ideas may be drawn. First,
definition, two main
of procure
form of government
contract, a method
is a specific
a procurement
articulates
the terms and
contract, a PPP
a
in
with
agency, a
which,
government
agreement
or
builds,
maintains,
operates,
designs,
party finances,14
private
a
a
or
to
due
the
actual
combination
service. Second,
manages
facility
to
assumed
of responsibilities
by the private partner, a PPP appears
a
an
wide range of contrac
which encompasses
be
umbrella-concept,
ment.
As
conditions
under
tual arrangements.
service
functions,
especially
where
the contractor
is ac
corded a larger role than has been customary in determining how the
11. Such as OMB Circular A-76, (May 29, 2003), available at http://oam.ocs.doc.
(last visited February 9,
gov/docs/OMB%20Circular%20A-76%20Revised%202003.pdf
2010) [hereinafter "OMB Cir. A-76"] The Circular was originally issued in 1955 to
regulate contracting out. It was revised in 1967, 1969, 1983, and 2003. The latter
revision introduced the principle ofmanaged competition between agencies and the
private
sector
of commercial
services.
See
infra Section
IIA.
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2010]
PUBLIC-PRIVATE
559
PARTNERSHIPS
out of major
contracting
a)
one
When
American
functions.
governmental
the PPP
that part of
concept one enters
law covering government
contractual
deal
examines
administrative
casebooks
in the twentieth
published
lo
century.16 Moreover,
attributes
it denotes
a tension
between
private
and
con
law of government
law, the American
a
not feature
such
Nor does
bifurcation.18
it vest the
over government
in an entirely dis
contracts
disputes
administrative
does
jurisdiction
administrative
at the trial
courts19
rulings
there is conclusive
judgment
Court on writ of certiorari.
The
15.
See,
reviewed
by the U.S.
Supreme
PPP
American
agreement.
unless
Despite
e.g., Donald
F. Kettl,
Sharing
Power:
Public
service
programs).
Governance
and
Pri
welfare
agencies,
and
social
16. The publication in 1966 of the first edition of the Federal Procurement Law
casebook authored by John Cibinic and Ralph Nash is usually considered the defining
moment, although R. Preston Shealey had published his first edition of the Law of
Government
in 1919.
Contracts
Government
Contracts
Law,
64 Geo.
Wash.
L. Rev.
633
(1996).
18. To be sure, due to the influence of some overarching principles of E.U., the
bifurcation of the French law has been attenuated.
19. Either an agency Board of contract appeals or theU.S. Federal Claims Court.
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THE AMERICAN
560
nership,20
and share
in which
profits
JOURNAL OF COMPARATIVE
LAW
[Vol. 58
and
United
States
to conduct market
activities.21
As
law ofPPPs
not present
between
contractual
and insti
the neat distinction
in
E.U.
law. In the United
the concept
tutional PPPs
observed
States,
does
construction,
design, financing,
upgrade,
a
or a bridge.
as
such
structure,
highway
such as maintenance
of
and operation
by the government,
provided
or even the operation
of a program of government
the infrastructure
not tied to specific infrastructure.
services, such as welfare,
Sub-forms of infrastructurePPP
b)
ifwe
Even
restrict
our view
to the infrastructure
PPPs,
we
see a
rights and obligations, the contract falls under one sub-formof a rich
array ofPPPs. In 1999, the GAO identified eighteen possible combi
nations
which
transportation,
which features
across
to
sectors.22 With
regard
one
enumerates
of
currently
eight types,
of these sui-generis
PPPs.23
The existence
used
be
may
the FWHA
sui generis
44 Procurement
Julia Pascal
20.
Public-Private
Law.,
Fall,
Davis,
Partnerships,
on such partnerships,
see infra n. 116.
2008, at 9. For state constitutional
prohibitions
in Con
21.
in New
Features
and Contract
John Reitz, Political
Law,
Economy
tract
at http://ssrn.com/abstract=
Law
247
available
(Reiner
Schulze,
ed., 2007),
12 Transnat'l
L. &
Contemp.
Probs
139-159
(2002).
22. The GAO lists 18 categories: 1) O&M: Operations and Maintenance {conces
sion)', 2) OMM: Operations, Maintenance & Management (wastewater treatment); 3)
DB: Design Build; 4) DBM: Design-Build-Maintain; 5) DBO: Design-Build-Operate; 6)
DBOM:
Maintain
Design-Build-Operate-Maintain;
8) DBFOMT:
{concession);
7) DBFOM:
Design-Build-Finance-Operate
Design-Build-Finance-Operate-Maintain-Trans
fer; 9) BOT: Build-Operate-Transfer also called greenfield PPP; 10) BOO: Build-Own
Operate; 11) BBO: Buy-Build-Operate; 12) Developer Finance; 13) EUL: Enhanced
Use Leasing or Underutilized Asset (the Department ofVeterans Affairs (VA)); 14)
or BDO:
LDO
Lease-Develop-Operate
{affermage)
to finance
a wide
variety
of capital
or Build-Develop-Operate
16) Sale/Leaseback;
assets,
ranging
(munici
from computers
to telecom
munication systems and municipal vehicle fleets); 18) Turnkey. GAO Glossary, supra
n.
12.
23. New facilities: 1) DB, 2) DBOM, 3) DBFO; Old facilities: 4) O&M, 5) Long
Term Lease; Hybrid facilities: 6) Lease-Develop-Operate; 7) Private Contract Fee Ser
vices; 8) Other Innovative PPPs. FHWA, P3 Defined, available at http://www.Aiwa.
dot.gov/ipd/p3/defined/index.htm.
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2010]
PUBLIC-PRIVATE
561
PARTNERSHIPS
of the non-exhaustive
is indicative
nature of the classifica
categories
are of the essence
in PPP design.
tion as tailoring and innovation
The U.S.
of affairs
betrays
a process
of legal
in trans
Thus,
transplantation.
deplored
between
the continuing
reliance
on fixed-price
sealed bidding with award to the lowest price in the United States
use of best-value
in Europe
the increasing
and Ca
contracting
of non-price
factors. Now, the U.S.
nada, which allows consideration
in adopting
is emulating
its European
and Canadian
counterparts
for
best-value
PPPs.
the reports
Likewise,
contracting
transportation
and
was
a limited intro
tolls from motorists,
signaled
as an alternative
of concession
to the fuel
to collect
allowed
duction
of the French
model
tax form of highway financing. Since 2000, this model has made
headway in the United States.26 The signing inMarch 2009 of the
first availability payment scheme in Florida is illustrative of the in
troduction of theUK formofPPP, PFI.27 Further British influence is
evident in the replacement
of the separate financial
between
package
structure incorporated
private contractor and lender with a financial
into the concession
and determining
risk allocation
all par
between
24. David
O. Cox, et al., Contract
in Eu
Administration
and Practice
Technology
at http://international.fhwa.dot.gov/contractadmin/;
available
rope, October,
2002,
et al., Construction
De Witt,
Steven
Practices
In Canada
and Europe,
Management
at
available
2005,
May,
http://international.fhwa.dot.gov/links/pub_details.cfm?
id=537.
Detroit
stands
as
a precursor
in that
as
early
as
1927
and
despite
the ascen
in 2007
DOT
Missouri
signed
a Design-Build-Finance-Maintain
agreement
with a private party to replace and rehabilitate 802 bridges. Long-term lease: Chicago
Skyway (2005), Virginia Pocahontas Parkway (2006), Indiana Toll Road (2006).
27. The public project sponsor pays availability payments to contractors based on
construction
milestones
or performance
measures.
See
3, 2009,
the Florida DOT signed a DBFOM including availability payment clauses for the up
grade of a segment of 1-595. JeffPaniati, (FHWA Acting Deputy Administrator and
Executive Director), Transportation Infrastructures Financing Opportunities and
Challenges, Fifth Annual Public Private Partnerships USA Summit, March 12, 2009,
DC,
Washington,
ers,
PPP
available
at http://www.fhwa.dot.gov/pressroom/re090312.htm.
28. Such parties include government, developers, project company, project lend
construction
Concession
consortium,
Agreements,
operators.
Cook, Modern
Jacques
28 Construction
Law.
Fall,
2008,
Enhancements
at 24,
26.
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All use subject to JSTOR Terms and Conditions
for
562
THE AMERICAN
JOURNAL OF COMPARATIVE
LAW
[Vol. 58
more
recent use
debates
important
a)
functions.
governmental
The 1990s mark the date ofbirth ofmodern American PPPs with
an average of 1000 PPPs being created annually since 2007.29 As
elsewhere,
structure
sectoral
real
estate/economic
water/wastewater,
health
care,
corrections,
education,
welfare,
parks
and technology.32
tion,30
the
Among
federal
departments
conducting
development,31
and recreation,
cam
promotional
has
been
prominent.
It has
resorted
to a large array
of means
to en
three experimental
programs
ulatory restrictions
impeding
innovative methods.33
itwaived
under which
statutory or reg
or explored
the establishment
of PPPs
to these non-financial
As a complement
incentives, federal finan
direct
cial support is provided
loans, loan guarantees,
through bonds,
officials; presentations
to states
and developers,
work
a non-profit,
D.C. metro
non-partisan,
station.
advocacy
organization.
facilities.
32. In particular communications: the FCC entrusted a PPP with the construction
of a nationwide broadband public safety network which will serve both public agen
cies and commercial users, the 700 MHz Second Report and Order ,22 FCCR 15289
(2007).
33.
The
first program,
SEP-14,
came
in 1990.
See
FHWA
website
at http://www.
website
at http://fhwainter.fliwa.dot.gOv/innovativefinance/ifq61.htm#TE045.
Lastly,
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2010]
PUBLIC-PRIVATE
563
PARTNERSHIPS
annual
conference
shops;34 a co-sponsored
or on transportation
in transportation,35
on public-private
ventures
finance;36
drafting model
revenue
stream
to investors)
attractive
as key
of DOT's
components
be viewed
sectoral
of the British
counterpart
Trea
for transportation
infrastructure
posed PPPs
projects and to stabilize
or
the
the financial
of
the
cyber infrastructure.40
system39
securing
b)
state
empowers
departments
of
It may
transportation.
type of PPP-
enabling
legislation
in transportation
infrastruc
sector
taking
a subordinate
role."
FHWA,
Report
to Congress
on PPPs,
Decem
FHWA,
38.
Mission
Public-Private
available
Partnerships,
d'Appui
Partenariats
at
http://www.fhwa.dot.gov/
Public-Priv?.
for Private
Sector,
Infrastructure
Investor,
January
22,
2009,
available
Urges Role
at http://
www.infrastructureinvestor.com/Article.aspx?article=33806&hashID=DlF2EBADCB
66B60913A33B1A45601AD68B6BEE43;
Treasury Department, Fact Sheet on Public
Private Partnership Investment Program, March 23, 2009, available at http://www.
treas
.gov/press/releases/tg65
.htm.
40. Barack Obama, Remarks by the President on Securing our Nation's Cyber
Infrastructure,
May
29,
2009,
available
at
http://www.whitehouse.gov/the_press_
office/Remarks-by-the-President-on-Securing-Our-Nations-Cyber-Infrastructure/.
See
also Kenneth Chang, Obama Plan Privatizes Astronaut Launchings, New York
Times, January 29, 2010, at A9.
41.
As
in California.
Legal
Issues"].
42. Virginia was among the pioneers in 1995. Transportation Research Board,
Major Legal Issues forHighway PPP, Legal Research Digest 51, January 2009 at 25.
available at http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_lrd_51.pdf
[hereinafter
"TRB,
43. The state were: AL, AK, AZ, CA, CO, DE, FL, GA, IN, LA, MD, MN, MS, MO,
NC, NV, OR, PR, SC, TN, TX, UT, VA,WA, WA. See FHWA website available at http://
www.fhwa.dot.gov/ppp/tools_state_legis_statues.htm
(last
visited,
Feb.
9,
2010).
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In
THE AMERICAN
564
JOURNAL OF COMPARATIVE
LAW
[Vol. 58
states had authorized PPPs.44 Still, more than half of the states lack
such legislation, a factwhich is indicative of the significance of im
pediments to the development of PPP. The latter category of states
tends to be located in the Northeast and theMidwest whereas the
new growth economies in theNorth and the South appear to be the
to the controversial
Due
pioneers.
nature
of PPP,
some
of the states
2007,
legislature
a moratorium
imposed
on new privately
financed toll roads and changed to 31 August 2009 the original sun
set date (31 August 2011) of the PPP enabling legislation.45 In June
and July 2009, itdid not reauthorize PPPs fortoll-roads.Even among
variations
the existing authorizations,
may be observed whether
considers
the types of arrangement
covered or the requirements
one
de
legislation
to inject
some uniformity
into state
laws.
B.
The
distrust
of government,
the entrenched
bias against
seem to be fertile ground
would
and
the strong
U.S.
on privatism,
in the economy
for public-private
emphasis
participation
for a preference
in
divide, and the history of government
contracting
public-private
use of forms of contracting
out
States
shows considerable
the United
to forms now being touted as PPP.
that stand as precursors
1.
Historical
a)
Background
been
supra
Issues,
TRB,
Legal
in 2003.
introduced
Id. See
n. 42, at
supra
also
16. CDAs,
n. 7.
the Texas
term
for PPPs,
had
46. Morton J. Horwitz, The History of thePublic IPrivate Distinction, 130 U. Pa.
L. Rev. 1423, 1424 (1982).
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2010]
PUBLIC-PRIVATE
565
PARTNERSHIPS
public law sought to protect a public realm from the king's feudal
on natural
law sought
power. Relying
rights, private
vate realm from interference by public power.
to protect
a pri
so-called
they viewed
from what
tendencies
freedom
and
expansion
of private
law and
correlatively
for
Scathingly
criticized,
the dichotomy
ebbed
away.
Correla
tively, the responsibility of the state for the public interest was
magnified. Thus, in a sense, under the legal realist approach public
law absorbed
private
law. Moreover,
the Great
Depression
was
the
as its role
vis-?-vis
of superiority
self-interests
private
sum
con
of
vectors
into
"a
reflection
the
of
the
of
morphed
private
as
law
of
law displaced
the
dominant
flict".48 Private
form
law,
public
attributes
an expansion
of government
there was
Although
conservative
Great
the
Johnson's
Society,
Reagan
during
action, fueled by neo-liberal
theory, and the subsequent
vide.
programs
counter-re
two Bush
ministration
advocated
term PPP emerged during the Clinton years. While the Obama ad
ministration's
stance,
to be interventionist,
as may be gathered
it also incorporates
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THE AMERICAN
566
b)
JOURNAL OF COMPARATIVE
LAW
[Vol. 58
Unsurprisingly,
law debate
law-private
reverberates
lends a supportive
environment
and
into fashion
to PPPs.
Prevalent
nineteenth century until 1929, the concept receded under the New
Deal
swung
back
after
conflagra
which
"refers to a cluster of contemporary
ideas
(NPM) paradigm52
and practices
that seek, at their core, to use private sector and busi
ness approaches
in the public sector."53 The NPM, which advocates
by President
W.
George
Bush.
in this quasi-resurrection
of the
Interestingly,
pletely disappeared.
reversal has occurred. On the one hand, since
late 1990s, a discursive
the end of the twentieth century those concerned with the assertion
of the public interest and the preservation of the public sphere have
stressed
On
the distinction.
ear
lier, the legal realists who equally meant to protect the public
interest and public law argued that the distinction was an obstacle
toward that end. In otherwords, alternatively the champions of the
interest
public
and public
law have
sought
to expand
either
or to con
But
they all
share
an attachment
to the public
interest.
One might have thought that the seeming decline of the public/
private distinction, the longtime diffusion of the notion that business
methods
tion,
provide
compounded
an
operational
by pervasive
model
distrust
for government
of government
administra
would
have
51.
tration:
David
H.
Congress
52. David
trepreneurial
Rosenbloom,
and the
Osborne
Spirit
Building
Administrative
a Legislative-Centered
State,
Reinventing
the Public
Public
Adminis
1946-1999
(2000).
Government:
How
Sector
(1992).
B. Denhart,
The New
Service
Public
12
the government
Al Gore
spearheaded
(2007).
reform
David
the
En
Osborne
phase.
53.
54.
Robert
Vice-President
through
the Na
tional Performance Review launched in 1993, renamed The National Partnership for
Reinventing Government in 1998.
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2010]
PUBLIC-PRIVATE
567
PARTNERSHIPS
even though the termwas not used until the 1990s, various levels of
in the United
government
States
have
long contracted
out important
sign a more
even though
for an old phenomenon,
role to government.
restrictive
the U.S.
to as
tends
2. Precursors to PPP
and
Construction
a)
We
struction
of major
operation
infrastructure
prise, with
and
maintenance,
government merely
For
monetary)
operation
roads
were
left to private
providing
and water
incentives
enter
(usually
this
transportation,
century.
first phase
was
responsibility formajor
started
followed
by an era
of increased
public
and-control
regulation
water
transportation,
early
nineteenth
PPP.
private
as
Thus
sumed
of
first
state subsidi
The nineteenth
century saw substantial
Pennsylvania.
zation of private enterprises
the
of American
down
backbones
laying
to build canals,
utilities.56 As they were pressed
commercial
docks,
railroads,
55. NCPPP, Critical Choices: The Debate over PPPs and What It Means for
America's Future 9 (2003); John B. Miller, Principles of Public and Private In
frastructure Delivery 81, 103, 113-14 (2000).
56. See,
Conditions
e.g., Minow,
of Freedom
James Willard
supra n. 15, at 1237-38;
in the Nineteenth-Century
United
Hurst,
States
and
the
32, 96-07,
79
Law
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568
THE AMERICAN
JOURNAL OF COMPARATIVE
LAW
[Vol. 58
private
ments,
of constitutional
to curtail unwise
amendments
com
enterprise
its commercial
capacities
toward
same
those
in the particular
intervention,
of roads
and water
transporta
construction
Road,61
exclusively
with
federal
funds.62
of revenue
owned,
and
petitive
procurement
for road
construction
and maintenance.
The
high
on the basis
corporations
by private
to the low bidder.
contracts awarded
of com
vention,
still
accommodates
private
through
participation
57. The federal government also resorted to such incentives to construct the indis
pensable transcontinental rail lines indispensable to thewestward expansion. Karl B.
Raitz & George F. Thompson, The National Road 23 (1996).
58. David E. Pinsky, State Constitutional Limitations on Public Industrial Fi
nancing: An Historical and Economic Approach, 111 U. Pa. L. Rev. 265, 278 (1963).
59. This model of direct public financing was also employed forharbor improve
ments, navigable river projects, navigation aids, territorial roads and trails, and
public buildings, Miller, supra n. 55, at 82.
60. From the early years of the Republic, counties had been responsible for rural
roads, but had sparingly discharged such responsibility.
61. It is otherwise known as the Cumberland Road.
62. Mainly through appropriations, with some land sales. Id. at 111.
63.
The
states,
which
gradually
assumed
ownership
of the road,
raised
revenues
through tolls while the federal government was in charge of upkeep and repairs
Rickie Longfellow, The National Road, available at http://www.fhwa.dot.gov/infra
structure/back0103.cfm (last modified on Dec. 23, 2008).
64. Ch. 241, 39 Stat. 355 (1916).
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2010]
PUBLIC-PRIVATE
to modern
precursor
PPPs.
569
PARTNERSHIPS
this
However,
is not
em
the analysis
is viewed
as a revival,
a restoration
of a pre-nineteenth
century
order, although in the earlier period, the role assigned to the private
party
seems
to have
even more
been
b)
than it is cur
encompassing
to the past is apparently meant
to
acquisition
delivery
of buildings."65
Known
as Lease-Purchase
Build-Operate
now
in fashion
The
exper
The use of the term PPP came rather late to the United States
and the termwas not formally recognized by government until the
1990s when
its adoption
was
influenced
by European
models,
includ
ing theNew Public Management. While the term PPP is, on the one
hand, used to refer to a fairly specific family of government contracts
for the construction,
maintenance,
or operation
of infrastructure,
es
tant government
the discretion
accorded
functions, especially where
the contractor under the contract gives the contractor a broader
role
in determining
than has been customary
how service is rendered
to
Id.
at 23.
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570
the
american
of comparative
journal
law
[Vol. 58
phenomenon
all
the
of important
privatization
II.
issues
that
government
extensive
services
in the Application
Problems
Forms of PPP
out or
contracting
raises.
of Existing
Law
to
forms of PPP,
those concerning
the re
by various
especially
of
interests
the
and
government
spective
private
contracting
State contracts are not subject to federal contracting
law,
parties.68
raised
involve contracts
level. The state law is quite
States
varied
and local
and difficult
in the United
the contracts
public
policies.
Space
does
not permit
a de
but because
in the General
number of the questions
Re
concern issues that are regulated
that
law,
by
to the Gen
law will be provided
procurement
porter's Questionnaire
a summary
of federal
ment
request
to the authors.
that
for example,
for systems of procurement
law provides,
as reasonably
as much
competition
possible.
Competi
contract
require
tion is not restricted to sealed bids forfixed prices, however; the rules
a range
allow
In the 1990s,
of competitive
negotiation
techniques.
which
trade
procurement,
long permitted
factors for technically
complex contracts for
negotiated
competitively
offs of price and quality
was
See
contracts.
of government
generally
Steven
W.
Feldman,
It also
provides
Government
clauses
Contract
to protect
Guidebook
(4th
ed. 2008-2009).
69. The most important standard for state procurement law is the ABA's Model
State
Procurement
Code,
on Privatization
Legislating
supra
and
n.9.
See
also
Subcontracting,
toMarket:
Ellen
To Market,
Dannin,
as
L. Rev.
249 (2001)(meant
60 Md.
many
examples
of different
out specifically).
70.
See
supra
state's
text following
rules
on procurement
generally
and
on contracting
n. 24.
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2010]
PUBLIC-PRIVATE
571
PARTNERSHIPS
in contract
interests
and private
government
party
performance,
or intellec
such as clarifying who owns property under construction
as
of
tual property developed
contract performance.
It provides
part
to change the work under
that allow the government
special clauses
the contract or terminate
all or part of the contract but also impose
on the government the obligation to pay for certain costs in the event
of a change
or termination
of contract
work.
It also
establishes
an
to
contractors
have
to establish
nesses,
may
government
plans
to
increase
the award of subcontracts
preferred groups, and contrac
tors must certify compliance with labor standards
and environmental
statutes.72
protection
There
of course,
are,
some
other
important
sources
of law
that
may apply tomost forms ofPPP. One especially important one is the
National Environmental Policy Act ( E A), which applies whenever
there are "major Federal actions significantlyaffecting the quality of
the human environment."73 E A thus clearly applies to federally
funded
contracts
of highways,
dams,
and
other
Assessment
(EA) must
be prepared
to ensure
that
the expected costs of the project do not outweigh its expected costs.
This section will focus on the way that enthusiasm forPPP has
led to a tendency toweaken some of the protections provided by these
kinds of law. As specific examples of this phenomenon, this section
will look at the failure to ensure adequate competition in the letting
of PPP
in which NEPA's
the way
rules for environmental
contracts,
have
been
weakened
the review process for
protection
by shortening
in some transporta
EISs
and EAs, and how non-competition
clauses
tion
contracts
have
had
infrastructure
unexpectedly
negative
The theme of this section is that the legal models
for
consequences.
protection
adequate
siasm for PPP may
A.
lead
Competition
One of the chief arguments for contracting out is the claim that
can provide
contractors
the services more
private
for lower overall cost?than
government
personnel.
71.
See
72.
See
supra
generally
73. 42 U.S.C.
text at n.
Feldman,
"efficiently"?i.e.,
Some advocates
19.
supra
n. 68.
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572
THE AMERICAN
JOURNAL OF COMPARATIVE
out make
claims
of contracting
very broad
LAW
[Vol. 58
in this regard,74
and
in a
The posited
are charac
such
to trim costs
entities
the preference
that, despite
to the bone.
The
contract
government
is
reality, however,
law gives to compet
any market
contractors
Sole-source
discipline.
If contracting
cannot
be said
out is to realize
to be under
to be so restricted.
but it does not appear
market,76
standards
that
Government
audits and the detailed
accounting
contracts
usual
form
of
sole-source
contracts)
(the
govern cost-plus
See,
e.g., Michael
J. Trebilcock
&
Edward
M.
Iacobucci,
and Ac
Privatization
or even
public
oversight
of private
actors").
Public
15 Cornell
Values,
J.L.
&
Pub.
Pol'y
111,
114
(2005).
See
also
Sharon
Dolovich, State Punishment and Private Prisons, 55 Duke L.J. 437, 495-500 (2005)
(because
of lack
of competition,
states
tolerate
prison
contractors
who
do not meet
contract requirements). Cf. TR?, Legal Issues, supra n. 42, at 30 (only a handful of
private companies bid on large-scale PPP highway projects).
76. "[A]ny absence of robust competition, a lack of experience specifying contract
results
. . . ."
or a
Dannin,
failure
supra
to monitor
n. 75, at
can undermine
benefits
performance,
privatization
sum
121 (quoting Representative
Christopher
Shay's
is
contract, which
to any subcontract
exceeding that amount ifthe prime contractor is subject to theAct. If itapplies, TINA
requires the contractor to submit cost or pricing data to the government and to certify
that the data are correct and complete, upon pain of civil and criminal penalties. If
upon audit, the government is able to show that the data were deficient, the contrac
torwill at a minimum be forced to pay the differencebetween the contract price and
the price that the governmentwould have negotiated ifthe disclosures had been accu
rate. Id. at ? 9:64, at 302; ? 9:76, at 312.
The government
also incurs monitoring
costs when
its own personnel
perform
and it is an empirical
whether
costs are greater
for moni
question
monitoring
the costs of monitoring
toring a non-governmental
entity, but it seems
likely because
include
costs to resolve
costs that are proba
substantial
privates
litigation
disputes,
in the case of government
government.
bly not incurred
monitoring
78.
a task,
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All use subject to JSTOR Terms and Conditions
2010]
573
PARTNERSHIPS
PUBLIC-PRIVATE
includes
viding a service. The true cost of using a private contractor
own labor and government monitoring
not only the contractor's
costs,
own administrative
but also the contractor's
costs, which may include
does not incur, like taxes. And the contractor
factors the government
would
like to earn a profit, to boot. For those very reasons, advocates
a given
doing
employees
from
One good idea that has nevertheless come out of the battle over
contracting
to compete
against
to
referred
competition"
(also
for a given
contract,
private-sector
and
the
contract.
The
federal
has
engendered
had
apparently
at least at some
in OMB
is embodied
rule
considerable
some success
Circular
Federal
controversy.81
in prevailing
under
but when
agencies,82
A-76,80 which
have
employees
these
competitions,
lose, private
they
industry
is
may
workers
spur government
to be more
efficient.
It is hard
to argue
is weakened
rule
by the courts'
refusal
to recognize
the stand
the process.83
employees
to compete);
see also
supra
Dannin,
n. 69, at 302-06
(state
statutes
limit information that could be considered and the decision makers inways that favor
privatization,
of the costs).
80.
81.
and
in some
supra n. 11.
contractors
Private
cases,
simply
require
privatization
without
consideration
See
see
a bias
against
contracting
out because
Circular
A-76
prohibits contracting out unless the private contractor offers at least a ten percent
review).
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574
THE AMERICAN
A related
about
point
JOURNAL OF COMPARATIVE
concerns
competition
LAW
[Vol. 58
the issue,
important
is ensuring
and
to the government.
ideas
competition.
Companies
The
may
require
the disclosure
of proprietary
information.
B.
Current
Weakening
to Encourage
Law
Example of E A
Out:
Contracting
The
to be an obstacle
to business
participation.
perceived
under current law, one particularly
significant obstacle
construction
project
involving
federal
funds
For
example,
to any major
is the National
Environ
construction
may
not commence
until DOT
approves
the EA
or
in recent years
has
attempted
to streamline
the process
TRB,
Legal
Issues,
supra
n. 42,
at 29.
Public-Private
Partnerships
in Transportation,
42 Val.
U.L.
Rev.
905,
toAccommodate
922-25
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(2008).
2010]
PUBLIC-PRIVATE
575
PARTNERSHIPS
nating DOT's approval role or collapsing itwith that of the states, the
C.
or eliminates
weakens
streamlining
Ill-Advised
Competition
that opportunity.86
Government
Contracting:
Clauses
Regret
have
clear
lease
to contractual
terms they later
concerns non-competition
clauses
agreed
is that govern
come
to regret.
in contracts
to
example
toll roads.
operate
and
have
proven
other roads.87
Could
Such non-competition
clauses may bind
not
to
to highways
make
entity
improvements
routes. In a number
of celebrated
cases, such
on
to be an obstacle
to highway
improvements
in PPP
clauses
toNon
in Agreeing
contracts
a government
prevent
from sub
v. Winstar
in United
But
States
the
prerogative.
Corp.,88
it
courts
to
have
made
for
Court
easier
find
may
govern
Supreme
are two
mental
liable for breaching
their contracts.
bodies
There
doctrines that used to protect the government.
One was the sovereign
mental
acts defense,which says that to the extent that the state is exercising
its sovereign
not be
powers
to regulate
general,
through
it can
acts,
public
other was
the
sover
says that the government's
doctrine, which
unmistakability
remain
will
intact
it is surrendered
in
unless
power
eign
terms. Perhaps
unmistakable
those doctrines
continue to protect the
at
Id.
The
939-40.
928-29,
author
also
argues
that
the
review
was
process
further restricted by tight deadlines, further squeezing out public comment and par
in the process.
Id. See
also
Sharon
E A
under
Assault
Buccino,
ticipation
and Administrative
Weaken
Would
Environmental
Review
Proposals
Congressional
12 N.Y.U.
Envtl.
L.J. 50 (2003).
and Public
Participation,
on
87.
Ellen
Privatization
Infrastructure
Contracts
and Their
Effect
Dannin,
two other types of clauses
Governance,
July 10, 2009, at 1 (also describing
commonly
in these kinds
of contracts
that create
found
similar
clauses
problems:
describing
a right to object to and receive
and those giving
events"
the contractor
"compensation
Private
to Be Aware
Issues
Partnerships:
of when
Transferring
Assets,
Transportation
35 Transp. L.J. 25, 35 (2008)(even though contract clause expressly permitted safety
modifications,
in order
to avoid
threatened
litigation
over non-compete
clause,
Orange
County, California, government ultimately bought whole tollway back); TRB, Legal
Issues,
supra
n. 42,
at 35-36.
governmental
bodies
are now
unwilling
or taxes
to cover
to agree
to, private
contractors
will
pre
government
to collect
tolls
Id.
at 32-33,
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35-36.
the
576
american
of comparative
journal
law
[Vol. 58
though they disagreed about how the doctrines applied. The two dis
senting justices thought that the doctrines applied to protect the
from
government
liability
case.
in the
Three
concurring
justices
thought that a contract between certain healthy banks and the Fed
Loan
eral Home
accounting
failing banks
to use a favorable
to buy some
for the banks
not
to
promise
change the
Bank
the banks
Board authorizing
as an inducement
an unmistakable
constituted
treatment
enacting
subsequently
that prohibited
treat
the accounting
kept
contractual
The
III.
Challenge
Interests
This
section
of Developing
and Values
some
examines
New
Law
Affected
to Protect
by PPP
in current
deficiencies
Public
law. Specifi
cally, the section looks at how current law fails to extend the public
of administrative
values
law, especially
of the non
government
wise
contracts
out complex
Contracting
PPP.
that constitute
services
to the public
that would
other
delegation
of
This
should be quite clear in the case of
authority.
governmental
care
care organizations,
the
of
health
through managed
privatization
use of private
to
state
administer
welfare
programs,
organizations
the use of charter schools and educational
management
organiza
of prisons.90
tions to operate
schools, and the privatization
public
involves
sensual
and
89.
See
Jody
See
Gillian
(2000).
90.
Freeman,
The
E. Metzger,
Contracting
Privatization
State,
28 Fla.
as Delegation,
St. U.L.
Rev.
103 Colum.
155,
L. Rev.
209-12
1367,
to privates).
Id. at 1462.
Cf.
Lester
M.
Salamon,
The New
Governance
and
the Tools
of
Public Action: An Introduction, 28 Fordham Urb. L.J. 1611, 1614 (2001) (new govern
ance tools involve "the exercise of discretion over the use of public authority and the
spending of public funds").
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2010]
577
PARTNERSHIPS
PUBLIC-PRIVATE
may
discretion
affecting
public
maintenance
subcontractors
assets
and
to engage
to select
a numerous
pub
to operate
rest stops.
contractual
contractor
use.
to governmental
individuals
and their access
programs. When
gov
ernment wields
this kind of power, we have developed
basic rules of
values
public
participation,
due process
for affected
individuals, and public rationality. These rules and values are found
in the federal
trative
and
procedure
state
acts
constitutions,
and
(APAs),
regulations at both the federal and state level. But these rules gener
ally do not apply to private parties, and some do not even apply to
government,
a growing
number
of commentators
argue
that
is neces
sary to extend the reach ofpublic law principles so that they apply to
forms of PPP.93
A.
seeks
tional
much
Metzger,
See,
e.g., Dannin,
n. 90.
supra
supra
75; Freeman,
supra
n.
15; Freeman,
supra
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All use subject to JSTOR Terms and Conditions
n. 89;
578
THE AMERICAN
1.
Contractor
JOURNAL OF COMPARATIVE
LAW
[Vol. 58
Actions
actions
by private
contractors.
The
Constitution
not
does
to
apply
ment
do other
constitutional
important
like equal
guarantees,
do not apply
form of rulemaking
the notice-and-comment
to
for disclosure
quirements
transparency
statutes
tractors.96
2.
So citizens
contractors
how PPP
Government
or similar statutes
cannot use FOIA
are exercising
their discretion.
to Contract
Decisions
to find out
Out
further. While
empt
clearly
process
from
and the federalAPA does not add any hearing requirements. By their
own terms, the formal hearing
requirements
of Sections
value
procurements,
important
issues
are
raised
whether
those
documents
are
need
to prevent
dis
in government
contracting
and
n. 42,
at 30-31.
the contractor's
Section 7 of the OPEN Government Act of 2007, 121 Stat. 2524 (2007), amended
the FOIA, 5 U.S.C. ? 552(f)((2) (2006), tomake it clear that any recordsmaintained
for a federal
agency
by a records
management
contractor
are
to be
treated
as govern
out services
to the general
to contract
does not
97. Because
the decision
public
as an identifiable
in a closed
of
affect a person
individual
class, but only as a member
an open class of persons
remits
them to the
affected as by a general
rule, due process
political process to defend their interests,not to the courts. See United States v. Flor
ida East Coast Ry. Co., 410 U.S. 224, 244-46 (1973).
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2010]
PUBLIC-PRIVATE
579
PARTNERSHIPS
federal contracts
ment rulemaking
and
grants
are
procedures
be a legislative
interests
sufficient
process?probably,
tive hearings?in
with
legisla
to be represented.
Whether
legislative
provide a
hearings
on
for due process hearings
substitute
view
one's
depends
ofhow well federal and state political processes work. The legislative
process would appear to be a particularly problematic substitute in
situations inwhich instead of authorizing a specificPPP project that
could be the subject of a clearly defined debate during the legislative
the
process,
grants
legislature
wide
to an
discretion
administrative
that
an
to extend
easy way
the requirements
of public
law
some aspects
of public law by contract clause or stat
not appear
to be any general,
thoroughgoing
attempt
contractors.
There are, at least, no general
that would
requirements
ensure the extension
of public law values
into all important forms of
out.100
contracting
98. 5 U.S.C.
? 553(a)(2)
(2006).
100. One might have expected contracts for themanagement of prison facilities to
provide
examples
of contract
clauses
imposing
due
process
obligations
on the compa
nies running prisons. But instead, the recommended approach in this industry is to
leave all significant decisions thatmight disadvantage prisoners (concerning classifi
cation, transfer,discipline, or parole) to government personnel and to limit the role of
the private prison operator and its employees to such functions as making reports and
recommendations about individual prisoners and carrying out disciplinary decisions
by
the government.
National
Institute
of Justice,
U.S.
Department
of Justice,
Con
tractingfor theOperation ofPrisons and Jails, in 3 Prisoners and the Law 22-17, 22
19 to 22-21 (Ira P. Robbins, ed., 2008); Ira P. Robbins, The Legal Dimensions ofPri
vate
Incarceration
in 3 Prisoners
and
the
Law,
op.
cit.,
22-33,
22-138
to 22-142
contractor
recommendations.
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580
THE AMERICAN
JOURNAL OF COMPARATIVE
LAW
[Vol. 58
B.
Contractor
Abuse
is not a governmental
the contractor
Since
are
its actions
entity,
uals
have
causes
law
any private
of action
the contractor?
against
Prisoners who are beaten in a private jail may have a claim under
state
about
the harm
an unemployed
person
suf
beneficiaries
the government
under
contract
or an
implied
unless
This
problem
says so.101
expressly
can also be cured by statute
or contract.
The
gov
or for whose
to whom
benefit the services are to be ren
the people
the government
dered. In the contracts for the carrying out of PPP,
to invoke ad
beneficiaries
could include clauses
expressly permitting
review.
and judicial
ministrative
Limits
C.
on What
best
The
Can
Be Contracted
abuse
Out
or Privatized
is prevention.
Perhaps
there are
cause
limits
of public
the
values.
legislature
Constitutional
may
delegate
to
The extent towhich contract clauses in other types of PPP might extend public
values
is not well
documented
and
needs
further
research.
Socoma
Co.,
Inc.,
521 P.2d
841
(Cal.
S. Ct.
1974)(rejecting
third party
claim).
See
also
Davis v. United Air Lines, Inc., 575 F. Supp. 677 (E.D.N.Y. 1983)(rejecting thirdparty
claim after Second Circuit rejected implied right of action claim in connected case).
102. Carter v. Carter Coal Co., 298 U.S. 238, 311 (1936)(holding that the scheme of
subjecting the entire coal mining industry to the wage decisions of the majority of
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2010]
PUBLIC-PRIVATE
581
PARTNERSHIPS
government
a power
of ratification,
"however
perfunctory."103
decisions
performable
by those
outside
government"
is a requirement
Jack Beerman
privates.105
Court
the Supreme
has
not held
any
government
to privates.106
to delegate,
but do not, of course, limit
Act, for example,
grants blan
Subdelegation
branch's
Congress's
power.
executive
branch,
power
The
official
thereof who
is required
to be ap
to private
Delegations
quire
thus
clearly
re
specific
more
is OMB
Circular
the executive
A-76,
significant
Perhaps
or
branch
rules for "managed
competition"
"competitive
sourcing."
Those
rules provide that "inherently governmental
functions" should
not be contracted
out.109 The Circular
defines
govern
"inherently
one of the following characteristics:
mental
functions" as having
representatives
ious form" and
violated
in its most
involved
and unions
obnox
"delegation
was
to a private
because
the delegation
body, not
and
person
may
especially
103. Metzger,
the business
In fact,
of another,
the federal
courts
apply the same liberal test to these cases as they apply to delegations to the executive
branch, promptingGillian Metzger to conclude that "constitutional law [at the federal
level, at least] makes no attempt to link the constitutionality ofa private delegation to
the risk that itwill place government power outside of constitutional controls." Id. at
1370; see also id. at 1441.
104.
Verkuil,
supra
n. 83,
at 425-26,
428-31,
447
text at n.284.
supra
supra
Freeman,
n. 83, at 424.
107. 3 U.S.C.
108.
109.
n.
15, at
1304
n.70;
Metzger,
supra
n. 90, at 1438-39;
Verkuil,
?? 301-302 (2006).
n. 83, at 426-28.
supra
Verkuil,
OMB
Cir. A-76,
supra n. 11, ? 4 a., b.
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582
THE AMERICAN
JOURNAL OF COMPARATIVE
LAW
[Vol. 58
action
by contract,
otherwise;
(2) Determining,
cal,
protecting,
territorial,
property,
order, or
authorization,
regulation,
policy,
and advancing
economic, politi
or other interests by military
or
tract management,
vate
or
persons;
ultimate
(4) Exerting
control
over
the acquisition,
or
use,
procedures
propriated
control, or disbursement
funds.110
of ap
governmental
Although
erably
out.112
that may be contracted
of the nondelegation
doctrine are consid
do not
the federal version,
the state versions
state versions
than
stronger
wake
of scandals
concerning
state financing
of railroads
in the 1830s
and 1840s. The most important of these clauses prohibit public finan
cial
to
aid
private
the "public
developed
Concomitantly,
enterprises.114
a substantive
doctrine,
purpose"
state
due
courts
process
See
113.
States
114.
Pinsky,
. 83.
supra
. 1.A.
112. Allison Stanger, One Nation Under Contract 84-108 (2009)(in 2007, more
than 180,000 government contractors (not counting subcontractors), as compared to
160,000 U.S. soldiers (at 84); contractors engaging in combat (at 89), in interrogation
(at 200)).
may
have
some
legislation
prohibiting
contracting
out
of certain
func
tions. For example, by statute both Illinois and New York prohibit private prisons.
Lucas Anderson, Note, Kicking theNational Habit: The Legal and Policy Arguments
forAbolishing Private Prison Contracts, 19 Pub. Cont. L.J. 113, 132-34 (2009).
supra
n. 58, at 278-80.
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2010]
public-private
583
partnerships
not adopted
on public
restrictions
constitutional
aid.
David Pinsky argued over fortyyears ago that the courts ofmany
states had interpreted the constitutional clauses and the public pur
pose doctrine to require sufficient public control over projects
supported by public financial means to ensure attainment of the pub
lic purpose, a requirement that could go a longway to ensuring that
public values are respected inPPP.116 But in fact, they do not appear
to have had that effect.The requirement forpublic control has been
relaxed "where attainment of the public purpose objectives is deemed
sufficientlyvital and the need for public capital sufficientlyur
gent,"117 a condition that may apply tomany examples of PPP. At
least inWashington State, it appears that the courts have narrowed
the constitutional restrictions on public aid and the public purpose
doctrine greatly by treating them as effectivelyprohibiting only gifts
to private
parties,
so that even
of a public
in the absence
an
purpose,
receives
"consideration."118
Even
these
state
New
Law
constitutional
on contracting
out.
- the
to Develop
Need
Conclusion
and
Public
Values
Public
to Protect
Interests
has
such
strongly
market-centered
political
economy.
Clearly, PPP is here to stay, has in fact long been with us, and will
increasingly
involve
complex
arrangements
of ser
vices, thus raising all the types of problems surveyed in this report.
115.
Id.
at
116.
Id.
at 284-89.
281.
Some
state
also
constitutions
David
M.
were
Lawrence,
later
amended
Private
Exercise
to incorporate
of Governmental
this
Power, 61 Ind. L.J. 647, 685-86 (1986)(confirming this part ofPinksy's analysis on the
basis of a few additional cases).
Not surprisingly in light of the literal wording of the public aid clauses, some
state courts interpreted the constitutional clauses as categorical bans on institutional
forms ofPPP. Pinsky, supra n. 58, at 283, 286 (discussing Lord v. City ofDenver, 143
P. 284 (Colo. 1914) (invalidating plan that it regarded as a joint venture between the
company and the city);Walker v. City ofCincinnati, 21 Ohio St. 14, 54 (1871) (clause
prohibits "a business partnership between a municipality or subdivision of the State
and individual or private corporations or associations")).
117. Pinsky, supra n. 58, at 292.
118. Nick Beerman, Comment, Legal Mechanisms ofPublic-Private Partnerships:
Promoting Economic Development or Benefiting Corporate Welfare? 23 Seattle U. L.
Rev. 175, 186-87 (1999) (discussing City ofTacoma v. Taxpayers ofCity ofTacoma,
743 P.2d 793 (1987)).
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584
THE AMERICAN
JOURNAL OF COMPARATIVE
LAW
[Vol. 58
Of all the problems, themost serious ones have to do with the need to
law values.
Some commentators
refer to this problem
extend public
as the issue of accountability.
re
L. Friedman
Well-known
New York Times
columnist Thomas
cently gave a trivial but clear example of this issue. He and his Iraqi
driverwere trying to get through the tightU.S.-provided security to
meet with a member of the Iraqi Governing Council in the Green
in Beirut.
Zone
The
contractor
civilian
young U.S.
who treated
soldiers
Friedman
ting the Iraqi driver at risk by requiring him to stand for a long
period of time in the hot sun. Friedman writes, "I kept thinking to
myself: 'Whodoes this guy report to? If I get in his face and he comes
after me, to whom do I complain?"'119
If a soldier or a bureaucrat
abuses
power in a serious way, there
so we know, at
a
is
chain of command
that is publically
available,
least in a general way, to whom to complain, and while we may not be
over
even judicial
some mechanism
for administrative
and maybe
we
a
to
If
contractor
whom
do
abuses
its
power,
private
sight.
we
ensure
and
How
administrative
do
judicial
adequate
complain?
in
levels of public participation
review? How do we ensure adequate
do we
ensure
the appropriate
level of transparency
con
for private
These
are
the challenges
of PPP,
and
to a large extent,
these
is
States.
119.
at A25.
Thomas
Friedman,
The Best
Allies
Money
Can
Buy,
N.Y.
Times,
Nov.
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4, 2009,