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The Risks and Tricks in Public-Private Partnerships

Author

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  • Elisabetta Iossa
  • Giancarlo Spagnolo
  • Mercedes Vellez

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.

Suggested Citation

  • Elisabetta Iossa & Giancarlo Spagnolo & Mercedes Vellez, 2013. "The Risks and Tricks in Public-Private Partnerships," IEFE Working Papers 64, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
    • Handle: RePEc:bcu:iefewp:iefewp64
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    File URL: https://repec.unibocconi.it/iefe/bcu/papers/iefewp64.pdf
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    Cited by:

    1. Anna Matas & Ginés de Rus & Stef Proost & Salvador Bertoméu-Sánchez & Antonio Estache, 2018. "The Financing of Infrastructure / La financiación de las infraestructuras / El finançament de les infraestructures," IEB Reports ieb_report_1_2018, Institut d'Economia de Barcelona (IEB).
    2. Díaz, Gonzalo Ruiz, 2022. "Private participation in government-led backbone network projects: Lessons from three Latin American experiments," Telecommunications Policy, Elsevier, vol. 46(8).
    3. Arbulú, Italo & Lozano, Javier & Rey-Maquieira, Javier, 2017. "The challenges of tourism to waste-to-energy public-private partnerships," Renewable and Sustainable Energy Reviews, Elsevier, vol. 72(C), pages 916-921.
    4. Hatice Çiğdem Demirel & Wim Leendertse & Leentje Volker & Marcel Hertogh, 2017. "Flexibility in PPP contracts – Dealing with potential change in the pre-contract phase of a construction project," Construction Management and Economics, Taylor & Francis Journals, vol. 35(4), pages 196-206, April.

    More about this item

    Keywords

    Concession contracts; Incentives; Public Private Partnerships; Risk Allocation;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D20 - Microeconomics - - Production and Organizations - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy

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