The Risks and Tricks in Public-Private Partnerships

IEFE - The Center for Research on Energy and Environmental Economics and Policy at Bocconi University, Working Paper Series No. 64

33 Pages Posted: 28 Mar 2014

See all articles by Elisabetta Iossa

Elisabetta Iossa

University of Rome Tor Vergata; IEFE Bocconi University; Centre for Economic Policy Research (CEPR)

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

Mercedes Vellez

University of Rome II Tor Vergata, Faculty of Economics, Department of Economics and Institutions (DEI); Center for the Study of State and Society (CEDES)

Date Written: December 20, 2013

Abstract

PPPs have been implemented broadly around the world in the infrastructure sector - water and sanitation, transports, energy and telecommunications - and, more recently, in the provision of public services -­ education, health, prisons, and water and waste management. Key aspects of the contract design, such as risk allocation and payment mechanisms, significantly affect the PPP outcomes because they affect the incentives of the public and private parties to deliver a public service that satisfies user needs. Nevertheless, contractual provisions used in practice often do not implement the efficient risk allocation. In this paper, we discuss the crucial role of the public sector in designing and imposing standardized contracts, monitoring their compliance, disclosing contractual information to the general public, and transferring risks to the private sector in order to reduce the likelihood of PPP performance failure.

Keywords: Concession contracts, Incentives, Public Private Partnerships, Risk Allocation

JEL Classification: D02, D20, D82, L33, L38

Suggested Citation

Iossa, Elisabetta and Spagnolo, Giancarlo and Vellez, Mercedes, The Risks and Tricks in Public-Private Partnerships (December 20, 2013). IEFE - The Center for Research on Energy and Environmental Economics and Policy at Bocconi University, Working Paper Series No. 64, Available at SSRN: https://ssrn.com/abstract=2416733 or http://dx.doi.org/10.2139/ssrn.2416733

Elisabetta Iossa (Contact Author)

University of Rome Tor Vergata ( email )

Via Columbia n.2
Rome, 00133
Italy

IEFE Bocconi University ( email )

Via Roentgen 1
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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Giancarlo Spagnolo

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501
Stockholm
Sweden

HOME PAGE: http://https://sites.google.com/site/giancarlospagnoloshomepage/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Rome 'Tor Vergata' ( email )

Faculty of Economics - DEI
Via Columbia 2
Rome, RM 00133
Italy

EIEF ( email )

Via Due Macelli, 73
Rome, 00187
Italy

HOME PAGE: http://WWW.EIEF.IT

Mercedes Vellez

University of Rome II Tor Vergata, Faculty of Economics, Department of Economics and Institutions (DEI) ( email )

Via di Tor Vergata
Rome, Lazio 00133
Italy

Center for the Study of State and Society (CEDES) ( email )

Sanchez de Bustamante 27
Buenos Aires, C1173AAA
Argentina

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