LOCALITY IN PUBLIC-PRIVATE PARTNERSHIP IN SOCIAL AND HEALTH CARE SECTOR CASE STUDY

Transcription

1 LOCALITY IN PUBLIC-PRIVATE PARTNERSHIP IN SOCIAL AND HEALTH CARE SECTOR CASE STUDY Martti Saarela Univerity of Oulu, Finland Eija-Riitta Niinikoki Univerity of Oulu, Finland Matti Muho Univerity of Oulu, Finland Abtract: According to Finnih law, a municipality tak i to produce ocial and health care ervice for reident. The municipality or joint municipal authoritie (JMA) can alo acquire ervice from private ervice provider. The firt aim of thi tudy i to decribe the operating environment of public-private partnerhip with repect to public procurement in the health and ocial care ector in a Finnih context. The econd aim i to explore how locality feature in the ervice purchaing and public procurement of a health and ocial care JMA located in a northern parely populated area. Thi i an ongoing retropective ingle-cae tudy focuing on the JMA and local enterprie in the health and ocial care ector in Northern Finland. The tudy ue databank of ervice purchae contract for data collection, to analye apect of locality in public-private partnerhip via data concerning ervice purchaing. A a reult of thi tudy, the operating environment of public-private partnerhip concerning public procurement in the health and ocial care ector in Finland i clarified. Locality in ervice purchaing i clarified in the context of health and ocial ervice, including core and upport ervice. Reult increae the undertanding of locality in the public-private partnerhip. Keyword: public-private partnerhip, public procurement, SME, locality, entrepreneurhip, health and ocial care 871

2 1. INTRODUCTION According to Finnih law, a municipality tak i to produce ocial and health care ervice for reident. The municipality or joint municipal authoritie (JMA) can alo acquire ervice from private provider. When a municipality or JMA procure ervice from a private ervice provider, it ha to enure that the ervice meet the tandard required of correponding municipal ervice. Traditionally, the public ector i een a reponible for the delivery of baic ervice in many EU countrie. The method by which thi public proviion of ervice i carried out are changing, and thi trend highlight a greater need for the public ector to work with and harne the benefit of the private ector. The experience of privatization ha hown that many activitie can be undertaken more cot-effectively with the application of private ector management dicipline and competencie (European Commiion, 2003). A public-private partnerhip (PPP) i a partnerhip between the public ector and the private ector for the purpoe of delivering a project or a ervice traditionally provided by the public ector. PPP recognize that each party ha certain advantage relative to the other in the performance of pecific tak (European Commiion, 2003). Another way to define PPP i to ee it a an agreement between the public ector and the private ector actor to provide an aet or public ervice which would traditionally be provided by the public ector, but which, a part of a PPP project, i provided by the private ector actor or i provided jointly (Hurt & Reeve, 2004). Creating private market for public ector ervice aim to increae ervice efficiency and adaptability a well a opportunitie for cutomer to chooe their ervice provider. It i particularly important that tax-funded public ector ervice are allocated equally, depite the fact that the market mechanim i ued intead of the traditional hierarchy (Kähkönen, 2007). To develop the ocial and health care ector and to anwer future challenge, the recently publihed report of the Finnih Minitry of the Employment and the Economy ugget a controlled increae of the private ector role. Although the public ector ha it own table and trong poition, the private ector i encouraged to come alongide the indutry, bringing more innovation, new way of working and efficiency. In particular, the model in which the private and public work ide by ide o that their efficiency and operation can be tranparently meaured and monitored i believed to be the key to a more efficient ytem. The public and private ector are encouraged to engage in cloer co-operation and to make more effort to integrate the variou care chain. Developing the procurement competence of public organization (e.g., a JMA) i one key area in which to improve partnerhip between the private and public ector (Minitry of Employment and the Economy, 2015). In the lat few year, international companie in particular have increaed their market hare in the opening market of municipalitie ervice. Part of the market hare growth ha occurred organically and part through acquiition. Small local buinee tend to diappear from the market when entrepreneur abandon the buinee due to acquiition or for other voluntary reaon, and at the ame time, the creation of new tart-up buinee i low. The activitie of large companie have caued broad debate on the ditortion of competition caued by their trengthened market poition. But on the whole, the rapid buine growth of ocial ervice houing i focued on a limited number of large companie (Lith, 2012). Current literature provide limited information about how public actor conider local SME a partner in public-private partnerhip providing legilative health and ocial ervice. The firt aim of thi tudy i to decribe the operating environment of public-private partnerhip concerning public procurement in the health and ocial care ector in a Finnih context. The econd aim i to explore how locality feature in the ervice purchaing and public procurement of a health and ocial care JMA located in a northern parely populated area (NSPA). Apect of locality in public-private partnerhip are analyed via a ingle cae tudy focued on ervice purchaing and public procurement. Thi tudy reearch problem can be condened into the following reearch quetion: 1. What i the operating environment of public-private partnerhip concerning public procurement in the health and ocial care ector in Finland? 2. How doe locality feature in the ervice purchaing and public procurement of a health and ocial care JMA located in an NSPA? 872

3 Thi i a ingle-cae tudy. To addre the firt reearch quetion, a literature review wa undertaken concerning local mall buine in public procurement in the health and ocial care ector in Finland. To addre the econd reearch quetion, a ingle cae tudy wa undertaken. According to Yin (1989, p. 23), a cae tudy i an empirical inquiry that invetigate a contemporary phenomenon within it real-life context, when the boundarie between phenomenon and context are not evident and in which multiple ource of evidence are ued. Thi cae tudy i baed on a databank of ervice procurement contract of the joint municipal authority of Kallio. The data collection wa conducted from 95 ervice purchae contract igned with Kallio ince it etablihment in Thee conit of all contract in term of public procurement during Data wa alo collected from public archive and explorative interview of repreentative of the Kallio management group. 2. RESULTS 2.1. Local mall buine in public procurement The public procurement proce i regulated by law and i different from private ector practice. The public buying proce mut comply with the principle of tranparency, equity and non-dicrimination. Procurement regulation are part of the European Union' internal market policie aimed to enhance the functionality of the internal market. They are about the realization of the free movement of good and ervice and the right of etablihment. According to the Directive on Public Contract, tate and municipal authoritie and other contracting authoritie hall put their contract out to competitive tendering. In Finland, public procurement i regulated in the Act on Public Contract, which i baed on the EU directive. The purpoe of public procurement regulation i to open up the public procurement market for all economic operator, irrepective of their ize. However, pecial attention need to be paid to the quetion of acce by mall- and medium-ized enterprie (SME) to thoe market; SME are generally conidered to be the backbone of the EU economy, and in order to make the mot of their potential for job creation, growth and innovation, SME' acce to public procurement market hould be facilitated (European Commiion, 2008). There ha been a growing interet in active government policie to enhance economic growth and employment via entrepreneurhip and SME policy. However, thee programme of direct or indirect aitance to SME are mainly upply-driven. SME policy i incomplete without a conideration of demand-driven element, in particular, initiative that aim to foter entrepreneurhip through government procurement (Preu, 2011). Public procurement i a tool by which government can provide upport to mall buine (Loader, 2013) and i the way by which government can ait SME while imultaneouly reducing the need for direct financial upport and improving the delivery of government ervice (Pickernell, Kay, Packham, & Miller, 2011). According to Blackburn and Smallbone (2011), it i urpriing that no more attention ha been paid in the academic literature to public procurement, taking into account the large amount pent by them, in comparion with attention to ubject uch a acce to finance and buine advice ervice. Lith (2013) tate that attention hould be paid o that via their own ocial and health ervice procurement action, public ector organization can affect the development of private ervice provider without the need for direct financial ubidie, tax incentive or adminitratively launched project. In order to keep the health ector developing, private market hould remain competitive, and the buine condition of SME hould remain favourable. Thi can be done either by dividing the purchae or by organizing competitive bidding otherwie uch that local companie can get involved to public purchae. Thu the market will not focu only upon on a few large national operator (Minitry of Employment and the Economy, 2015). The relationhip between SME and public procurement i mutually beneficial and encourage greater involvement (Fee, Erridge, & Hennigan, 2002). From the perpective of SME, public procurement preent a market opportunity that provide chance to engage with reliable, large-cale buyer and potentially in long-term contract that interet the SME in trying to expand their cutomer bae and achieve growth (Reijonen, Tammi, & Saatamoinen, 2014). For the public ector, mall firm offer the bet potential job growth and innovation (Fee et al., 2002). 873

4 Although public ector contract repreent an important potential market opportunity for SME, in practice, they often face coniderable barrier in acceing thee contract. Thi i due to the procurement practice of public bodie and the weaknee and capacity contraint among potential SME upplier (Blackburn & Smallbone, 2011). Walker and Preu (2008) identified two type of barrier for mall upplier. There are general mall buine problem, uch a the lack of a track record. On the other hand, challenge lurk in the procurement proce, not leat in the recommendation that the public ector hould aggregate it pending to achieve greater economie of cale. An increaed involvement of SME in public purchaing will reult in higher competition for public contract, leading to better value for money for contracting authoritie. In addition to thi, more competitive and tranparent public procurement practice will allow SME to unlock their growth and innovation potential with a poitive impact on the European economy (European Commiion, 2008). A a rule, local apect are forbidden, baed on the non-dicrimination rule of procurement legilation. However, ocial and health care legilation provide many ecuring claue concerning the quality of ervice for cutomer and their relative, uch a taking account of the cutomer individual need. Procurement legilation allow the ue of ditance and location requirement in call for tender, when procurement functional objective i aociated with obligation baed on the law. In thee cae, the location of ervice ha value to the cutomer, and the ditance within which the ervice are rendered can be taken into account Locality in public procurement of health and ocial care JMA located in NSPA Kallio Cae The joint municipal authority of Kallio, which wa etablih by the municipalitie of Alavieka and Sievi and the citie of Nivala and Ylivieka, tarted operating in Kallio arrange the ocial and health ervice in the area of thee municipalitie and citie. The operation area i located in the outhern part of Northern Otrobothnia in Finland. The region i defined a a northern parely populated area (NSPA). The population of Kallio operation area i approximately inhabitant. Kallio role a a local economic actor i broader and more comprehenive than thi tudy embodie, becaue the focu of thi tudy i to decribe a public-private partnerhip and locality only through ervice purchaing. However, Kallio arrange ervice a purchaing ervice, but alo by producing the ervice themelve, and via a ervice voucher ytem. In particular, a voucher ytem i an important apect of the locality. The JMA can provide ervice via a ervice voucher, in which the JMA agree to pay for the ervice provided by private actor. In the economic ene, a voucher ytem mean turnover annually. In addition, the data do not contain any contract concerning pecial health care ervice, which actually comprie about 25 % of the total expenditure of Kallio. On the whole, the budget of Kallio for 2015 i approximately , which alo include the area of early childhood education. The joint municipal authority of Kallio public-private partnerhip relation occur in the ervice procurement. The databank of Kallio ervice procurement contract include 95 ervice purchae contract, all the contract in term of public procurement during Kallio ervice provider partnerhip conit of 66 % core ervice partnerhip and 34 % of upport ervice partnerhip. From the core ervice, 46 % are aociated with health care ervice and 54 % with ocial ervice. In thi tudy, a local ervice provider i defined a an actor whoe regitered office i located in the region of Oulu South. The region of Oulu South i not a governmental unit or area. It wa formed to increae inter-municipal co-operation and to gain critical ma for national and international competition. Thu, the region of Oulu South i a larger area than the operation area of Kallio. A regional level i defined a the area that extend approximately 100 km from the operation area of Kallio. The actor whoe regitered office are located further away are conidered nationwide ervice provider. Figure 1 preent the ditribution of Kallio partnerhip baed on the type of ervice provider. 874

5 Figure 1:: Decription of o databank off ervice purch hae contract /partnerhip b by number. Private % 19% 60% 21% Public Third ector Loccal 28% Regional 5 57% 15% 37% Naationwide Operation Area of Partneer Typ pe of Partner Locaal 4 46% Regional Natiionwide 17% Operation Area A of Private Partner The type e of Kallio partnerhip p are decriibed in figure e 1. Thi ho ow that the e predominan nt type of partner i the private ervice prrovider (60 %). % Nonethele, the public (21 %) a and the third d ector a alo both repreented d a importan nt group of partnerhip. The ditribution of the operation o (19 %) are area of private ervice provider i more ba alanced betw ween area than the ditribution bettween all partner. al of ervice purchae p i approximattely Accord ding to ditrib bution of con ntract by The tota value, 55 5 % of ervice are core e ervice, and a 45 % upport ervice e. From the e core ervic ce, 83 % relate to o ocial care e and 17 % to t health care ervice. In thi tudy, ocial care ervice alo include purchae ed early ch hildhood ed ducation errvice. In ocial care ervice, tthe mot ignificant ubparag graph are the houing g ervice for f elderly people, p diab bility ervice e and child d welfare ervice. Figure 2 h how Kallio ervice purcchae decribed by reallized value in n Figure 2:: Decription of o databank off ervice purch hae contract by volume (rrealized value in 2014). 9% % Private 46% Lo ocal Public 45% Third ector Tyype of Partner 11% 10% Reegional 7 79% Naationwide Operation Area of Partne er Loccal 19% 9% 7 72% Reggional Nattionwide Operation Area of Private Parrtner o the reult by volume, the public ector' role in the proviiion of purcha aed ervice e i quite Baed on large (45 5 %), which at the ame e can be noted in the h hare of local provider, becaue mo ot of the public pa artner are from f the ope eration area of o Kallio. Mo ot ervice provided by the public ector are aociatted with food d upply and d cleaning e ervice. How wever, it i notable, n when n examining only the operation area of private partne er, that locality i highly realized in the publicc purchae of Kallio artner have e a reaonab bly large ha are of ervicce (19 %), examined e (72 %). Nationwide, however, pa ng to the volu ume of contra act. accordin nterpreting th hee reult, it mut be e taken into account that the public operator may m alo When in provide ervice in the t form of buinee b ( (i.e. via public companie). Thee acctor are cla aified in dy a public ector provid der. The am mount of third ector partnerhip byy number (19 9 %) with thi tud repect to the value e of the con ntract, (9 %), % i high. The mot ignificant re eaon i tha at ervice or (including g aociation, etc.) arre aociate ed with errvice of contract with the third ecto rehabilita ation. Third-ector actor mainly pro ovide place and environ nment for re ehabilitation,, and the direct ca ah flow of uch a king of o provided ervice are low. l 3. DIS SCUSSION N m of thi tud dy wa to de ecribe the operating o en nvironment of o public-priva ate partner hip with The aim repect to public pro ocurement in n the health and ocial care c ector in i a Finnih context. The e econd 875

6 aim wa to explore how locality feature in the ervice purchaing and public procurement of a health and ocial care or a joint municipal authority located in a northern parely populated area. The firt reearch quetion, What i the operating environment of public-private partnerhip concerning public procurement in the health and ocial care ector in Finland? wa anwered in chapter 2.1. The literature review dealt with the framework of public procurement regulation and the challenge of SME to become involved in public purchae. Public procurement can alo be een a a vehicle by which the public ector can provide upport to mall buinee. Becaue mall buinee tend to be local, the locality apect can be een in the ame context a challenge of SME in public procurement. Thu, when SME are taken into account in public procurement, in the proce, locality in public procurement appear. The econd reearch quetion, How doe locality feature in the ervice purchaing and public procurement of a health and ocial care JMA located in an NSPA? wa anwered in chapter 2.2. The decription of ervice purchae contract provide an overview of the background of the ervice providing partner of Kallio. Reult how that according to the number, private ervice purchae partner are the dominant group. However, at the ame time, the public ector and third ector both have an important role in ervice proviion. The reult are conitent with Verhoet and Mattei (2010), who ee that in welfare ervice, the diviion of production tak in Europe ha hifted from the public ector monopoly production to a mixed economy of well-being, which arie in particular with a horizontal diviion featuring co-operation between the public, private and third ector (Verhoet & Mattei, 2010). The reult alo how ervice purchae contract by volume. According to the reult, cah flow from Kallio ervice purchaing remain mainly in the local area. Baed on the reult when examining only the operation area of private partner, locality i highly realized in the public procurement of Kallio, particularly when locality i viewed by volume. Thi i conitent with Cabra (2011), where upplier operating in contruction or ocial care ervice tend to be local, and other upplier operating in highly pecialized or niche market may have eaier acce to the market independent of location. On the bai of the available data, the participation of local actor i realized well in Kallio ervice purchae. SME in public procurement contract are particularly important for the development of peripheral region of member tate and the European Union (Fee et al., 2002). The demographic decline and the concentration of the remaining population in the main ettlement bring challenge to vital buine and effective competition in the NSPA. SME enure the vitality of the region, epecially in parely populated area. In term of locality, the challenge may be that local companie cannot provide all the neceary ervice. Cabra (2011) claim that local authoritie in rural or peripheral area may face ignificant challenge in finding what they need within patial proximity. Thi fact may force many local authoritie to award contract to non-local buinee. On the other hand, from the mall buine perpective, exceive focu on a ingle partnerhip can caue a ignificant hazard. According to Lith (2012), private provider of ocial ervice are highly dependent on local public purchae of ervice or commitment. Almot three quarter of private ocial ervice provider old at leat half of their ervice to the municipal communitie in 2010 (Lith, 2012). REFERENCE LIST 1. Blackburn, R., & Smallbone, D. (2011). Policy upport for SME. Environment and Planning C: Government and Policy, 29(4), Cabra, I. (2011). Mapping the patial pattern of public procurement. International Journal of Public Sector Management, 24(3), European Commiion (2003). Guideline for ucceful public-private partnerhip. Bruel: Directorate General Regional Policy. 4. European Commiion (2008). Commiion taff working document, European code of bet practice facilitating acce by SME to public procurement contract, 2008, Fee, R., Erridge, A., & Hennigan, S. (2002). SME and government purchaing in Northern Ireland. European Buine Review, 14(5),

7 6. Hurt, C., & Reeve, E. (2004). An economic analyi of Ireland' firt public-private partnerhip. The International Journal of Public Sector Management, 17(5), Kähkönen, L. (2007). Neljä näkökulmaa kuntaektorin palvelujen kilpailuttamieen. Pellervo Economic Reearch Intitute Working Paper, no. 98, Lith, P. (2012). Palveluaumien markkinat Suomea 2010-luvun vaihteea, Tilatollinen elvity toimialan palvelukyynnätä, palvelutuottajita ja yritytoiminnan kehityketä. Publication of The Minitry of Employment and the Economy 24/ Lith, P. (2013). Ykityiet oiaali- ja terveypalvelut, Raportti ykityietä palvelutarjonnata ja yrityten kavuta ekä julkiita hankinnoita ja toiminnan kehittämietä oiaali- ja terveypalveluia. Report of The Minitry of Employment and the Economy 34/ Loader, K. (2007). The challenge of competitive procurement: Value for money veru mall buine upport. Public Money and Management, 27(5), Loader, K. (2013). I public procurement a ucceful mall buine upport policy? A review of the evidence. Environment and Planning C: Government and Policy, 31(1), Minitry of Employment and the Economy (2015). Hoito- ja hoivapalvelualan tila ja tulevaiuudennäkymät. Report of The Minitry of Employment and the Economy 1/ Pickernell, D., Kay, A., Packham, G., & Miller, C. (2011). Competing agenda in public procurement: An empirical analyi of opportunitie and limit in the UK for SME. Environment and Planning C: Government and Policy, 29(4), Preu, L. (2011). On the contribution of public procurement to entrepreneurhip and mall buine policy. Entrepreneurhip & Regional Development: An International Journal, 23(9 10), Reijonen, H., Tammi, T., & Saatamoinen, J. (2014). SME and public ector procurement: Doe entrepreneurial orientation make a difference? International Small Buine Journal, Verhoet, K., & Mattei, P. (2010). Guet Editorial. Special Iue on Welfare governance reform and effect in the pot-golden age. Public Management Review, 12(2), Routledge, London. 17. Walker, H., & Preu, L. (2008). Fotering utainability through ourcing from mall buinee: Public ector perpective. Journal of Cleaner Production, 16(15), Yin, R.K. (1989). Cae tudy reearch: Deign and method. Beverly Hill, Sage Publication. 877