3.2 Effective interaction with the public sector
To mitigate political & regulatory risk, private companies should make a conscious effort to facilitate constructive interaction with the public sector. Such interaction will prevent misunderstandings, create transparency on the impact of regulations for the public and private sectors, and contribute to an overall mutually beneficial atmosphere.
Constructive communication with public agencies
Just as political & regulatory intervention can occur at any time during the life cycle of an infrastructure project, so can a well-designed communication initiative, whose details will vary according to a company’s presence and activities in the country and sector. Some principles, however, will apply in most cases:
- Avoidance of strategic misrepresentation. From the beginning, bidders should refuse to give any misleading information during bidding and contract negotiation, even if such information is accepted (or even demanded) by public-sector representatives. For instance, bidders should not conceal any suspected problems that their construction plans might encounter.92
- Proactive sharing of information. Conscientious communication will reassure the public-sector agency regarding successful delivery, and reinforce its trust in the private company’s effort. For instance, the company should provide timely and comprehensive reports on progress and issues during the construction phase.
- A single, continuous point of contact. By employing a single individual or group to provide regular communication over the entire life cycle, the company will more easily build trusting relationships. The public-sector agency will know with whom to speak, as well as the appropriate contact in the organizational hierarchy in case of difficulties, both before and after the construction period. This is one way to avoid the pattern of “seeing each other during tendering, and then again in court”.93
As infrastructure sectors are highly regulated, optimizing communications with public agencies is strategically important for private companies, which need to embed this responsibility at a high level within their organizations.
Monitoring of political developments, and advocacy strategy
Given the importance of regulation, communications between the public and private sectors should not be limited to specific projects, but should extend to matters of industry-wide regulation. In that way, political decisions can take the industry’s views into account, and will not come as a surprise.
Figure 16 outlines one approach to regulatory engagement. It starts with an unbiased trend analysis, which could be conducted by external experts as the company might be overconfident about the accuracy of its own world view. With the potential for major regulatory changes, it becomes even more important for the private sector to engage proactively in developing a target regulation and an appropriate advocacy strategy.
In many cases, a joint industry approach on the national or international level is the most effective way to secure an appropriate regulatory regime.94
Figure 16: Approach to Regulatory Engagement
Source: BCG case experience
EXAMPLE: The International Air Transport Association (IATA) engaged with stakeholders after 9/11 to standardize previously uncoordinated international rules on airport security procedures. The new standard, agreed by 19 key governments, is being rolled out globally from 2014 to improve travellers’ experience while keeping security tight at airports.95
Ultimately, any proposed regulation’s credibility will depend on the balance maintained between various interests. Hence the need for multistakeholder approaches, to be discussed in chapter 4.