Public-Private Partnerships: Risk Allocation and Value for Money

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