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Analyzing risk in PPP provision of utility services: A social welfare perspective

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  • Moore, Mark A.
  • Boardman, Anthony E.
  • Vining, Aidan R.

Abstract

This paper analyzes the trade-offs between the social cost of risk bearing and incentive effects for technical efficiency in PPP contracts for utilities. Using a principal-agent perspective and assuming the government principal maximizes social welfare, the government should be risk neutral. It is inefficient for PPP agents to provide financing. Design/build offers the greatest potential PPP gains, but not necessarily more than fixed-price contracts. There may also be efficiency benefits during the operations phase. But, if agents have little control over revenues, then PPP operation creates substantial risk-bearing costs for agents.

Suggested Citation

  • Moore, Mark A. & Boardman, Anthony E. & Vining, Aidan R., 2017. "Analyzing risk in PPP provision of utility services: A social welfare perspective," Utilities Policy, Elsevier, vol. 48(C), pages 210-218.
    • Handle: RePEc:eee:juipol:v:48:y:2017:i:c:p:210-218
    DOI: 10.1016/j.jup.2017.08.008
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