Public-Private Partnerships: Risk Allocation and Value for Money

CentER Discussion Paper Series No. 2014-022

TILEC Discussion Paper No. 2014-017

45 Pages Posted: 20 Mar 2014 Last revised: 1 May 2014

See all articles by Joaquim Sarmento

Joaquim Sarmento

Technical University of Lisbon (UTL) - School of Economics and Management

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Date Written: March 19, 2014

Abstract

This paper reviews the literature on the allocation and valuation of public-private partnerships (PPPs). First, the paper discusses why governments pursue PPPs and how value for money (VfM) is achieved. Second, the paper reviews the principles of risk allocation and valuation from an academic and public sector perspective. Both the private and public sector consider risk allocation to be a critical issue with respect to PPPs and VfM generation, although governments adopt a less complex approach to risk measurement. This paper analyses papers, case-studies, and reports concerning VfM from PPPs and concludes that, from an academic perspective, the majority of PPPs do not create VfM (government reports usually reach the opposite conclusion).

Keywords: Public-Private Partnerships; Risk; Risk Allocation; Value for Money

JEL Classification: G32; G38; H54

Suggested Citation

Sarmento, Joaquim and Renneboog, Luc, Public-Private Partnerships: Risk Allocation and Value for Money (March 19, 2014). CentER Discussion Paper Series No. 2014-022, TILEC Discussion Paper No. 2014-017, Available at SSRN: https://ssrn.com/abstract=2411450 or http://dx.doi.org/10.2139/ssrn.2411450

Joaquim Sarmento (Contact Author)

Technical University of Lisbon (UTL) - School of Economics and Management ( email )

Rua Miguel Lupi, 20
Lisbon
Portugal

Luc Renneboog

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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