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
Date Written: December 20, 2013
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: Suggested Citation