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Some Theory, Some Ideology and Lots of Pragmatism in the Cost-Benefit Analysis of PPPs

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  • Antonio Estache

Abstract

This paper reviews the theoretical debates on the extent to which PPP demands changes in how cost-benefit analysis needs to be conducted for public projects. It presents first a simple conceptual discussion which shows that the comparison between PPP and public procurement boils down to: (i) the difference between the discount rate and the total cost difference between the best PPP bid and the best public sector option (including in the cost difference the allocation of operational risks and the likelihood of these risks). It then looks at international practice and shows that pragmatism, and sometimes ideology, dominates theory in the use of cost benefit analysis to compare the two forms of provision.

Suggested Citation

  • Antonio Estache, 2012. "Some Theory, Some Ideology and Lots of Pragmatism in the Cost-Benefit Analysis of PPPs," Working Papers ECARES ECARES 2012-027, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2013/126487
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    References listed on IDEAS

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    1. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2013. "The Basic Public Finance Of Public–Private Partnerships," Journal of the European Economic Association, European Economic Association, vol. 11(1), pages 83-111, February.
    2. Flyvbjerg,Bent & Bruzelius,Nils & Rothengatter,Werner, 2003. "Megaprojects and Risk," Cambridge Books, Cambridge University Press, number 9780521009461, January.
    3. Alain Bonnafous, 2006. "Projets en PPP et choix des investissements Commentaire sur l'article : Pierre Kopp, Rémy Prud'homme," Revue d'économie politique, Dalloz, vol. 116(6), pages 871-877.
    4. Antonio Estache, 2006. "PPI divorces vs. PPI partnerships in Infrastructure," ULB Institutional Repository 2013/43914, ULB -- Universite Libre de Bruxelles.
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