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CHAPTER ONE
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The Evolution of Cross-Sector Partnerships
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HOWARD W. BUFFETT AND WILLIAM B. EIMICKE
During and after the Great Depression, massive, government-led investments reignited economic growth in the United States. Modernization during the twentieth century’s World Wars resulted in dramatic improvements in the production and infrastructure capacity of the United States. Subsequently, the privatization movement in the 1980s and the reinventing government reforms in the 1990s sought to redefine and downsize the role of government in society. In the twenty-first century, nonprofit organizations of all shapes and sizes are playing an ever-larger role in what was previously considered the purview of government. Today, cross-sector partnerships are carrying out major infrastructure projects and social programs, sometimes on an international scale. Despite their global reach, much of this partnership activity is a relatively recent, and understudied, phenomenon.
Beginning in the 1980s, public and private sector leaders, politicians, advocates for social change, and academic researchers focused increasing attention on accomplishing large-scale goals through public-private partnerships. These PPPs, as they are widely known, became somewhat “fashionable” and more prevalent in the years that followed.1 In the simplest terms, public-private partnerships are working agreements between a government and a nongovernment organization to reach a shared objective in line with the legal terms of a contract.2
There is a substantial amount of scholarship on public-private partnerships, but only more recently have researchers turned to cross-sector partnerships that include social, philanthropic, and nongovernmental organizations where the primary purpose is to serve the public good.3 Such cross-sector partnerships focus on a wide range of goals including research and development, local economic growth, poverty alleviation, and public health. In addition, these types of partnerships act as a critical enabling mechanism for accomplishing otherwise impossible objectives, or for addressing previously unsolvable, complex challenges.4
Cross-sector partnerships, including those profiled throughout this book, are an important development because they help focus numerous and diverse actors on the pursuit of socially valuable activities.5 They empower partners and stakeholders alike to overcome collective action problems6 and to better identify and track the negative and positive externalities of their work.7 We believe that such partnerships may help society move past the individualistic rent-seeking and free-rider behavior that dominates traditional views of economic self-interest.8 Although cross-sector partnerships may not be the easiest way to get important things done,9 we show that they have great potential to leverage resources from all three sectors to meet public objectives efficiently and effectively at a scale not otherwise possible.10
REACHING A GLOBAL SCALE
The emergence and proliferation of cross-sector partnerships is a reflection of the inability of one sector to effectively address many of our most substantial societal challenges. Regardless of such limitations, a number of significant collaborative efforts have made, and continue making, considerable progress. One example is the United Nations Millennium Development Goals (MDGs). In place for fifteen years between 2000 and 2015, this effort represented society’s most significant attempt at positive collective action on a global scale. The MDGs and their call to action resulted in “a coherent framework for the entire UN system [which includes governments, private businesses and non-governmental organizations—NGOs] to collaborate toward shared, common goals.”11
Among the eight MDGs were many goals historically viewed as the primary responsibility of government, including poverty and hunger eradication, universal primary education, gender equality, and environmental sustainability. The UN’s subsequent global agenda, the Sustainable Development Goals (SDGs), have expanded this list to seventeen, along with 169 measureable targets.12 The SDGs also include a goal fully dedicated to promoting partnerships as a means to strengthen society’s collaboration for accomplishing the other goals. Even more than before, individuals and organizations of all types are engaging in the SDG agenda and taking remarkably active roles to support one another. For example, Bill and Melinda Gates convened some three hundred participants in late 2017—including activists, journalists, investors, philanthropists, businesspeople, government officials, and more—to raise the visibility of the goals and to broaden public engagement. Called “Goalkeepers,” this group is helping to track and report progress on the SDGs annually, advocating for increased government action, and promoting sustained commitment from all sectors.13
An inclusive approach is important for many reasons, particularly because there is no one “best” sector for leading major cross-sector partnerships. Nor can any one sector or organization effectively deliver the many diverse goods and services required for meeting important national and global challenges, whether in sustainability, economic growth, or inequality.14 There is no question that organizations of all types and sizes have to band together, and partnerships will play a major role in reaching complex and large-scale outcomes such as the SDGs.
As cross-sector partnerships increase in size and prevalence, we can draw from some important historical lessons. For instance, the current state of partnerships has been profoundly influenced by the evolution of government-led collaboration in the United States over the past 160 years. Although the public, private, and philanthropic sectors in the United States have been, and remain, independent, there is a long history of formal cooperation between them. We believe this collaboration has helped shape modern partnerships in the United States and around the world, and this chapter touches on major developments in U.S. history since the 1800s.
PUBLIC-PRIVATE PARTNERSHIP EARLY ON
In the early nineteenth century, rugged individualism became the popular ideology of America: pioneers and cowboys “winning” the West through their creativity and the sweat of their brow. In reality, it was the Morrill and Homestead Acts of 1862 and later amendments, plus the public-private partnership to build a coast-to-coast railroad system that connected the nation’s people and markets, that enabled the West to flourish. The Homestead Act, although far from perfect, turned over 270 million acres of public land to be claimed and settled by private citizens, including immigrants, single women, and former slaves.15 The federal government also provided a series of incentives to leverage private capital and labor to build the transcontinental railroad: land grants, direct appropriations to companies involved in the development, waivers and modifications to taxes and regulations, contracts for services, and government backing for corporate bonds.16
The public policy to build a national railroad system came at the beginning of what Robert Gordon coined as an era of “Great Inventions” and rapid economic growth.17 Between 1870 and 1940, the American home went from isolated to connected: electricity, gas, telephone, water, and sewage. The United States was transforming from rural to urban, from underdeveloped to developed. Our life expectancy and quality of life increased dramatically.
Many of these transformative innovations were driven by private finance, entrepreneurs, and the expansive corporations they created. Often known as “robber barons,” it was Carnegie, Edison, Mellon, Phipps, Rockefeller, Vanderbilt (and others) and the companies they founded that enabled the modernization of the United States. However, as we learned from the market crash in October of 1929, rapid and monopolized modernization and expansion (along with the investment frenzy that resulted from these world-changing innovations) can lead to disaster.
“THE ONLY THING WE HAVE TO FEAR IS FEAR ITSELF”
By 1932, the United States was in the throes of the worst economic depression in the nation’s history: 25 percent unemployment, runs on banks, businesses closing, and the developing Dust Bowl disaster that left much of the country’s breadbasket cropless. President Franklin Delano Roosevelt promised Americans “A New Deal” and used the bully pulpit of the presidency (and the expanding power of radio networks) to encourage hope. As he famously said, “The only thing we have to fear is fear itself.”
Elected in November 1932, FDR did a lot more than deliver inspirational speeches and fireside chat radio talks. As former New York Governor Mario Cuomo stated, he “lifted himself from his wheelchair to lift this nation from its knees.”18 Roosevelt assembled a team of the country’s best and brightest from all sectors, both parties, and every background (including Frances Perkins as Secretary of Labor, the first woman appointed to a cabinet position in U.S. history).19 He had them innovate and experiment relentlessly to get the country back on track. Roosevelt sought to save capitalism by reinventing it—putting people’s lives back together through an alphabet soup of agencies and the multitude of partnerships they formed with business.
FDR’s administration regulated banks much more strictly, but the government also guaranteed savings in private banks and initiated mortgage insurance and purchasing programs that enabled millions of families to own homes and farms. These government-led partnerships with private banks forever changed the country—many of the nation’s renters became owners with a long-term stake in the system.20 During this time, the American public became real shareholders in the U.S. economy.
The federal government financed huge public works projects—dams, bridges, rural electrification, and even the Tennessee Valley Authority (a government-owned economic development corporation)—that created demand for privately manufactured products and stimulated economic growth through cheap power and ubiquitous access to public highways and bridges. Social Security and Unemployment Insurance programs provided mandatory support for the retired and those out of work, were paid by contributions from workers and employers, improved the lives of millions of Americans, and stimulated the economy.
The biggest economic boost came from FDR’s commitment to supply the World War II Allied forces in Europe by mobilizing U.S. manufacturing to build tanks, planes, jeeps, and weapons, and produce supplies, which often were financed by loans from the U.S. Treasury. The war effort effectively ended the Depression and simultaneously funded the manufacturing infrastructure that enabled the country to become a global consumer manufacturing powerhouse for decades to come. This connection between national security and domestic economic growth would continue as FDR had showed how large projects with a public purpose could succeed when the private sector was engaged more as a partner than in the limited role of a contractor.
A MASSIVE AND NEW INTERSTATE PARTNERSHIP
In the two decades following World War II, the next three U.S. presidents initiated major government programs employing the capacity of the private sector to dramatically stimulate the U.S. economy and make life better for millions of Americans. President Dwight David Eisenhower took a job creation and infrastructure development plan of FDR’s—a national superhighway—and made it perhaps his most important legacy. The National Interstate and Defense Highways Act of 1956 called for the creation of roughly 40,000 miles of new U.S. interstates crisscrossing the country, with the federal share initially estimated to cost $24.8 billion (about $230 billion in 2018 dollars).21
Currently, the system is more than 48,000 miles long and a federal review in 1991 estimated its cost (including additions not originally planned) closer to $58.5 billion in 1957 dollars (about $549 billion in 2018 dollars).22 From the beginning, the project was a partnership. The federal government authorized the construction and provided 90 percent of the funds to states. States generally paid a 10 percent match for which they were given ownership of the highways within their state lines and the responsibility for maintaining them.23 The states, in turn, generally contracted with private companies to build the roads. Although national defense is often associated with the act, its primary benefits (and some would say “costs”) were economic expansion, spread of the population, and the interconnectivity of the country that it stimulated.
One of the largest public works projects in U.S. history, now known as the Dwight D. Eisenhower National System of Interstate and Defense Highways, our federal highway program not only facilitated the movement of people and goods but also enhanced national security and deepened our national identity. Similar to the New Deal, this government-led partnership, connecting the country in new ways, reminded Americans that we are all on the same team pulling toward a common purpose.
President Eisenhower helped create one of the most successful infrastructure partnerships in U.S. history, but he had concerns about the dangers of partnerships between big government and big business. In his nationally televised farewell address to the nation, Eisenhower warned of the rise of a “military-industrial complex”—a partnership sharing a common interest in the business of war that he saw as a stark and potentially harmful trade-off. “The cost of one modern heavy bomber [could fund] a modern brick school in more than thirty cities…we pay for a single destroyer with new homes that could have housed more than eight thousand people.”24
THE NEW FRONTIER
With the Cold War worsening in the early 1960s, control of outer space became a key battleground between the United States and the USSR. The USSR took the lead, strategically and in terms of global prestige, with the launch of Sputnik in 1957 and kept that lead as manned space flight began. President John F. Kennedy viewed the situation as so dire that on May 25, 1961, he delivered a special address to a Joint Session of the U.S. Congress25 requesting up to $9 billion in new funding so that “this nation should commit itself to achieving the goal, before the decade is out, of landing a man on the moon and returning him safely to the earth.”26
JFK’s call to action—and his New Frontier agenda—resulted in the Apollo program of the U.S. space agency, NASA. President Kennedy did not live to witness Astronaut Neil Armstrong proclaim “That’s one small step for a man. One giant leap for mankind” from the surface of the moon on July 20, 1969, at 10:56 PM EDT. But his vision was realized because of public-private cooperation, and it was witnessed by more than half a billion people watching on live television.
NASA ran the Apollo program with federal government funds, but fulfilling the mission would not have been possible without a number of private corporation partners including North American Aviation, Grumman, General Dynamics/Convair, and others. The strong national defense rationale of the Apollo program dictated federal funding and a top-down partnership structure that centralized power in the government. Some observers believe this government-dominated partnership neglected commercial technology transfer opportunities. This could have offset costs and perhaps stimulated more innovative approaches, but in the context of the Cold War competition with the Soviet Union, driving down costs was not a priority.27 JFK’s initial estimate of $9 billion expanded to $12 billion by 1963 and exceeded $21 billion by the time Armstrong stepped on the surface of the moon, thereby limiting the future of that era’s manned space exploration.28
In the twenty-first century, NASA and outside experts now agree that more balanced partnerships are essential in developing a sustainable and successful space exploration program.29 Private companies such as SpaceX and Orbital ATK are already flying robotic vessels to supply the International Space Station and may soon transport astronauts. SpaceX has developed a reusable rocket, which could dramatically cut the cost of space exploration while making the company a significant profit.30 Mars, Jupiter’s Europa moon (which likely has liquid water), and Saturn are on the agenda of space explorers and entrepreneurs.31 We cannot predict when this will happen or what we will learn, but we are reasonably certain that cross-sector partnerships will be essential to getting us there. There are also great risks in space exploration, as we learned early in the Apollo program on January 27, 1967, when Astronauts Chaffee, Grissom, and White were lost in the testing of the Apollo I rocket—and learned again in the Challenger and Columbia explosions.32
THE GREAT SOCIETY
Lyndon Baines Johnson was sworn in as president November 22, 1963, following the assassination of John F. Kennedy. Johnson was a skilled politician, particularly at the congressional level, and he seized this opportunity, using the tragedy to enact a number of JFK’s initiatives. Johnson then built on that success, embarking on his own ambitious agenda to end poverty, make education and health care more affordable and effective, and put people to work—even if it required federal government subsidies. Johnson referred to it as a war on poverty designed to create a Great Society for all.
Similar to the New Deal, the Great Society comprised dozens of new initiatives; some worked but many did not. The Great Society included several programs that changed the United States forever for the better, including Medicare, Medicaid, Head Start, PBS, and National Public Radio, and a dramatic increase in federal assistance for urban housing and community development. The Vietnam War essentially ended the Great Society and Johnson’s presidency, in contrast to the aftermath of World War II when the New Deal had secured Roosevelt’s central objective of revitalizing the U.S. economy.
Johnson’s Great Society also marked the end of the era of partnerships directed by “Big Government.” Medicare and Medicaid depended on the private health care system to care for its patients, and the Great Society’s education and jobs initiatives were generally partnerships among the three levels of government: local, state, and federal. Johnson’s programs in housing, community development, and job training relied on nonprofit, often community-based organizations, as implementation partners, which was quite a different approach. The Community Action Program even created community-based agencies to fight poverty and get people into jobs. Many of the Great Society housing programs provided grant funding directly to nonprofit, community organizations to acquire, rehabilitate, own, or manage affordable housing in cities across the United States.
THE AGE OF DISCONTINUITY
In 1969, Peter Drucker, a professor of management at New York University, wrote that the age of discontinuity was on the horizon. New technologies were already emerging, the international economy was now a global economy, large institutions (particularly the federal government) had lost the public trust, and knowledge would become the most important form of capital in the coming years.33 Drucker believed that the new world economy was “the one positive achievement of the period since World War II,” that it was a creation of business not government, and that it provided a tremendous opportunity for economic growth and a force for global unity.34
Drucker wrote that government was never more prominent—the largest employer almost everywhere, “all-pervasive”—but also that it was “sick.” After decades of government-led success, Drucker argued that government was big rather than strong and that it had lost the trust of the people, particularly the young. Government was a poor manager, crippled by bureaucracy and red tape, with a reward system based on loyalty rather than performance.35
Drucker’s solution to this dilemma might surprise you. We believe it opened the door for both the privatization movement of Ronald Reagan and Margaret Thatcher, the alternative “reinventing government” philosophy championed by Bill Clinton and Al Gore, and the cross-sector partnership approach we now propose.
Drucker said government should focus on governing—make fundamental decisions by focusing the energies of civil society: dramatize issues, present choices, and set a course consistent with the will of the people. This is, in essence, a collaborative process in the United States because fundamental decisions require the agreement of a president and a Congress elected by the people, which is designed to represent our diverse population in a balanced way. Implementation of those decisions—execution, operations, and performance—should be handled by nongovernmental institutions such as businesses, universities, and hospitals (which were his examples). In this construct, government sets major objectives, and the private and nonprofit sectors seek to achieve the intended results. Drucker called this approach “reprivatization.”36
Business is independent of government. It both innovates and abandons because the market forces a performance-based measurement—profit. Profit is easy to understand, clear to see, requires recognizing and taking risks, and provides significant consequences for success or failure. Drucker also believed that non-business organizations have their own rationale for effectively implementing government objectives. For example, he cited the World Bank and the International Monetary Fund (IMF) as successful reprivatizations. These groups were organized and funded by governments and major financial institutions from around the world, but they operated independently in compliance with their mission and sound business and social principles.
Drucker concluded that we need “a strong and very active government,” but a government that acts as a conductor of an orchestra, not an “eighteenth-century organ virtuoso that…could—and should—play all parts simultaneously.”37 As you will see in the coming pages, Reagan and Thatcher applied an extreme and somewhat distorted version of Peter Drucker’s reprivatization theories, which led to the reinvention paradigm created by David Osborne and Ted Gaebler and implemented by Bill Clinton and Al Gore.
GOVERNMENT IS THE PROBLEM
On January 20, 1981, Ronald Reagan gave his inaugural address to a country weary of a deepening recession, high inflation, and the hostage crisis in Iran. Unlike many presidents before him, Reagan did not see massive government programs and spending as the answer. He said, “government is not the solution to our problem; government is the problem.”38 In that same speech, Reagan said his solution would be to reduce government’s burden on private industry, reduce the size of government, and cut taxes. Over time, and often in tandem with Margaret Thatcher, his contemporary and the conservative prime minister of the United Kingdom, Reagan championed what became a global movement to “get government out of the way” and maximize the role of the private sector in society, thereby empowering consumer choice and getting things done more efficiently.
Throughout the 1980s and 1990s, governments around the world sold public assets to private companies, including airlines, telecommunications companies, steel plants, shipyards, ports, power and energy companies, water companies, and even roads, bridges, schools, and prisons. What is now known as the privatization movement dramatically reduced the size of government globally and changed how we all think about providing public services. The movement had a greater impact in Europe where government ownership of major services was far more prevalent than in the United States.
In fact, it was not until 1987 that President Reagan appointed his Commission on Privatization; at that time only Conrail, the national freight rail service, had been sold. Reagan had been more successful in transferring employment from the federal civil service to private contractors (sometimes employing the same people) with a total of 38,000 jobs transferred and a reported savings of $602 million annually.39 This trend toward contracting out government services accelerated after Reagan left office, becoming a key principle of President Bill Clinton’s reinventing government movement.
Privatization also dramatically changed the United Kingdom, the reunified Germany, much of Eastern Europe, and many countries in Asia and Oceania (Singapore, Australia, New Zealand, South Korea, and even China) by moving industries and services from public agencies to private companies. Reagan and Thatcher also led an international movement in support of free trade, which seemed to work as the prevalent pessimism of the 1970s faded and a spirit of optimism and determination grew throughout the 1980s.40
Large-scale and often privately driven infrastructure partnerships multiplied throughout the 1980s and 1990s, operating on the middle ground between the government-dominated New Deal and Great Society and the strict antigovernment mantra of Reagan and Thatcher. Massive, well-known examples proliferated during this time. The Eurotunnel launched in 1986 and is one of the largest privately led partnerships in modern history, spanning two countries, ten construction companies, five banks, and multiple insurance companies and government agencies.41 This contrasts against the often and continuingly troubled development of the Panama Canal from a century before, which failed multiple times as a strictly private initiative, and continues to struggle as a government-dominated enterprise.
In the United States, projects such as the Chicago Skyway and the Indiana Toll Road often are called privatizations, but they were public-private partnerships structured as long-term leases from the government. Other large transportation infrastructure partnerships in the United States include the Denver Eagle P3 commuter rail, the Hudson-Bergen Light Rail in New Jersey, and the AirTrain JFK in New York City. A number of very large partnerships are under way all over the globe, including replacement of the Tappan Zee Bridge in metropolitan New York. This long overdue project failed multiple times over more than a decade for being too costly, but it now seems well on its way to completion through a privately led partnership.
Public-private partnerships are a major category of public works projects that many observers label privatization. Even more widespread are contracts between government agencies, tax rebates to private businesses that advance a policy agenda for infrastructure development, and initiatives for private for-profit and nonprofit organizations to deliver goods and services previously delivered by public servants. These efforts are considered conditional privatizations if they are limited by the length of the contract term and service provisions and if program responsibility is returned to the public sector when the contract concludes.
Other examples of government services that are delivered by private companies now include low-income housing construction and management, child care, elder care, job training, water systems, elementary and secondary education, homeless services, transportation, prisons, and non-combat field support to the military. Some of the most ardent critics of privatization have embraced contracting out government services as a way to make government work better and cost less. In fact, Bill Clinton and Al Gore used this approach to contracting to hold down the cost of the federal government and move decision making and service delivery of social services to local governments and for-profit and nonprofit organizations.
REINVENTION FOR GOVERNMENT
In the mid-1980s, David Osborne, a journalist and author, was so discouraged by the Reagan presidency’s performance on the domestic front that he turned to state governments to evaluate what was being done. To his delight, significant innovation was taking place, including education innovation by a little-known governor in the small state of Arkansas and housing innovation by a better-known governor from the big state of New York, Mario Cuomo.42
Osborne expanded his exploration of innovation to local government when he partnered with Ted Gaebler, a city manager who was pioneering new ways of running government more like a business. In 1992, Osborne and Gaebler published an unlikely best seller, Reinventing Government, which ultimately had significant influence on the incoming Clinton-Gore administration.43 The authors disagreed with Reagan and Thatcher that the solution to the world’s problems was to get rid of government. Rather, they sided with Peter Drucker, arguing that government was critical to making society better but that government needed to be more efficient, less costly, and partner with other organizations from all three sectors to make the world a better place.
Osborne and Gaebler outlined ten principles of reinvention; the principles were not new then, nor are they surprising today, but taken together they set out a role for government much different from the New Deal / New Frontier / Great Society eras, and equally different from the privatization philosophy of Reagan, Thatcher, and George H. W. Bush. In brief, the ten principles are these: government should steer rather than row (let others “do”); empower rather than serve; create competition in service delivery; focus on mission rather than rules; fund outcomes rather than inputs; have customers define performance; focus on earning not just spending; prevention over cure; decentralize; and leverage change in the market.44 Bill Clinton was impressed by this, created a reinvention commission, the National Performance Review, and appointed Vice President Al Gore as its leader. Staffed by federal employees and volunteer outsiders, as well as David Osborne, the commission’s report debuted in September 1993 and served as a blueprint for the Clinton administration’s operational reform efforts throughout its eight years.45
The short-term impact of reinvention in the U.S. government was not much different than prior government reform efforts: budgets were cut, fewer workers were hired, some regulations were eliminated, the hiring and procurement processes were streamlined somewhat, and some layers of management were eliminated. More profound and long-term was the decentralization of authority for many social welfare programs to state and local governments. In turn, those local governments then chose to contract with community-based nonprofit organizations (and some larger for-profit firms). This trend was particularly pronounced in the programs generally referred to as “welfare to work,” and often the contracts paid for performance outcomes—job placement and retention—rather than more traditional payments for time and materials.
Another significant innovation during the reinvention era was the theory and practices of then mayor of Indianapolis, Indiana, Stephen Goldsmith. Goldsmith campaigned as an advocate of privatization, but once in office he became convinced that competition between existing public agency providers and interested private contractors might yield the best public services at the lowest cost to taxpayers. During his eight years in office, Goldsmith conducted dozens of competitions, what he called marketization, for government activities from filling potholes to sewer billing, wastewater treatment, running the airport, and towing away abandoned vehicles. Sometimes a government agency won back its work, sometimes the private firm won out, but overall the city was able to provide better services at a more efficient cost. Ultimately, the mayor and his union leaders won a Harvard Kennedy School Innovation award for carrying out these innovations while simultaneously making sure workers either kept their jobs or were able to transition to new positions.46
The ideas and lessons of reinvention were not limited to the United States. Osborne and his collaborators encouraged others around the world to adopt the principles. In the United Kingdom, Australia, and New Zealand, governments accelerated contracting out of services, increased competition between contractors and government agencies, and set up government agencies as independent “companies,” often known as state-owned enterprises. As a philosophy, reinvention-based principles encouraged cooperation and collaboration across sectors and levels of government.
Slowly but surely the principles of reinvention ignited experiments at all levels of government, many of which began to look and act like cross-sector partnerships. Privatization evolved into contracting, then competitive contracting (including government agencies as bidders) emerged, and now we see a culture of innovation and collaboration developing among all three sectors.47 We believe this is the beginning of a major change in how government interacts with other organizations—moving from director to regulator to partner.
GOVERNING THROUGH PARTNERSHIPS
Experiments with cross-sector partnerships took place during the administrations of President George W. Bush and President Barack Obama. For example, the federal government aggressively pursued contracts with faith-based organizations (FBOs) to carry out a wide range of social programs, including housing, homeless services, job training, and education. To encourage these partnerships, President Bush established an Office of Faith-Based and Community Initiatives (which President Obama renamed the Office of Faith-Based and Neighborhood Partnerships). The office worked across the traditional agency boundaries to redirect funds from existing federally funded social service and housing programs through the states into contracts with religiously affiliated community-based nonprofits. Even though federal funds could not be used for religious purposes, grant recipients benefited from leveraging other funds, facilities, and the trust of local religious, community-based organizations. The White House made it clear that FBOs were eligible to receive federal funds and worked with them, and federal agencies, to ensure that these organizations applied for competitive grants. Because of this, the number and amount of federal grant awards to FBOs increased by 38 percent (number of grants) and 21 percent (total funding awarded) from five different agencies (Health and Human Services [HHS], Housing and Urban Development [HUD], Department of Justice [DOJ], Department of Labor [DOL], and the Department of Education [ED]) between 2003 and 2005 alone.48
The George W. Bush administration also created the Millennium Challenge Corporation (MCC) to improve the outcomes of U.S. foreign assistance programs. MCC uses a competitive process for country eligibility, and prioritizes country-led solutions and country-led implementation. The goal was to achieve transformative progress in governance, economic growth, and social improvement in countries making headway but still facing significant challenges. By early 2018, MCC had invested over $13 billion in twenty completed country-led compacts, had eleven in progress, and had only terminated two projects. More than $3 billion had gone to infrastructure projects, including power generation and transportation (including ports).49
MCC differs from many other foreign aid programs. It seeks to reduce poverty through local economic growth, often funding infrastructure-focused public-private partnerships that address local development priorities.50 MCC also requires performance measures and evaluates the success of projects based on independent analysis, assessing whether or not a project’s economic returns exceeded the cost of MCC’s investment.51 Based on publicly available data, reports indicate that more than 90 percent of MCC funds have invested in projects achieving measured economic benefits in excess of the projects’ costs.52 MCC attracted bipartisan support throughout the Bush and Obama administrations, and we believe this results-based, cross-sector partnership methodology could be expanded to other aid programs.
Similarly, President George W. Bush’s Emergency Plan for Aids Relief (PEPFAR) has provided more than $7 billion to help people affected by AIDS, particularly in Africa, by channeling the resources through local countries and working through nongovernmental organizations. The themes of these programs—measurement, reward performance, local ownership, achieve scale of impact, efficiency, and partnership—illustrate that the principles set out by Drucker and Osborne continue to resonate decades after they were first articulated.
In 2008, the government took a decidedly expanded role in multi-stakeholder collaborations when it launched the Global Partnership Center at the U.S. Department of State. Initially established by Secretary of State Condoleezza Rice and an advisory committee focused on new forms of transformational diplomacy, this office grew dramatically after the transition to the Obama administration. Their mission was to engage “businesses, philanthropy, and community organizations…to advance foreign policy goals and expand the scope and effectiveness of the Department.”53 These early efforts provided important groundwork for the development of future partnership doctrine during the Obama administration, where the Center was expanded into the Office of Global Partnerships reporting directly to the Secretary of State.
In 2009, President Obama established a new White House Office of Social Innovation and Civic Participation. Charged with helping government to do business differently, this office worked to establish new partnerships with citizens, nonprofits, social entrepreneurs, private foundations, and corporations to make progress on the nation’s greatest challenges. The office sat at the pinnacle of government reinvention, illustrating that these principles had really taken hold at a national level (we discuss this further in chapter 2).
In fact, members of the national security community also share these views. In 2013, Deputy Secretary of Defense Ashton Carter and Vice Chairman of the Joint Chiefs of Staff Admiral James Winnefeld issued a department-wide memorandum arguing in favor of partnerships between the Department of Defense and nonfederal entities. They called for an increased use and breadth in “voluntary, non-contractual collaborations” with outside organizations of all types in order “to achieve mutually agreed goals.”54 Moreover, U.S. defense Joint Doctrine supports entire divisions or directorates at Defense Department combatant commands focused on partnership development, as is the case with U.S. Pacific Command and U.S. Southern Command.55 The 2017 Global Trends report published by the National Intelligence Council identified “multi-stakeholder multilateralism” as a core driver of changing power dynamics in the coming decades.56 In it, the intelligence community argues that traditional forms of “material power—typically measured through gross domestic product, military spending, population size, and technology level,” will no longer define “the most powerful actors of the future.” These actors will be the “states, groups, and individuals who can leverage material capabilities, relationships, and information in a more rapid, integrated, and adaptive mode than in generations past.”57 In other words, power will become more and more decentralized, and success in a globalized world will require the coordinated action of many different types of organizations and people.58
SHARING SUCCESS: GLOBAL CHALLENGES AND GLOBAL OPPORTUNITIES
Many of today’s most important public issues are global, crisscrossing national borders: inequality, climate change and severe weather, trade practices and imbalances, conflict and displaced persons, migration and immigration, human rights, poverty, availability of food and water, transportation, natural resource management, and natural disasters. Not only do these issues cross national borders, but national borders can be part of the problem. Global challenges require global solutions. Institutions such as the United Nations, the World Bank, the IMF, the International Finance Corporation (IFC), the G-20, and regional organizations such as the Inter-American Development Bank (IADB) and the Association of Southeast Asian Nations (ASEAN) can and do lead global initiatives.59 However, these multilateral, government-led partnerships can be easily bogged down by bureaucratic procedures and regulations. Fortunately, many of today’s NGOs and businesses also are global, and they are leading new partnerships and driving solutions in ways not previously possible. Great challenges are facing us as a global community, and we see government, business, and the social sector partnering in new ways to meet our current challenges efficiently and effectively.
Throughout this book you will see examples of how organizations from all three sectors can accomplish major public objectives that might otherwise be unattainable. Each type of organization brings natural advantages and certain limitations in addressing national and international issues, but today’s new forms of partnership can amplify those advantages while minimizing the limitations.
We have seen an evolution of partnership structures over the past few decades, and we believe there is enormous potential in how current and future public, private, and philanthropic capital can be deployed to solve society’s problems. This type of social value investing, as we describe in the coming chapters, provides opportunities for organizations to create more inclusive and comprehensive approaches to global challenges. As our world continues to transform, so too will our organizations and institutions. Through better collaboration and by sharing success through cross-sector partnerships, the next progression of this evolution will lead to significant improvements in the quality of life for billions of people around the world.