The purpose of this paper is to address contractual tradeoffs in the extended use of private enterprises in the provision of infrastructure services: Which is the appropriate way to allocate responsibilities between the public sector principal and the private sector agent, taking the nature of the underlying optimisation problem into account? To this end, both matters related to allocative and productive efficiency are discussed. The former concerns the appropriateness of using user charges to pay for new infrastructure and ways and means of ascertaining that a contractor takes due account of user effects in the design and maintenance of a new facility. The discussion of productive efficiency in the first hand focuses the design of contracts with respect to sharing of risk between the parties. We also address the incompleteness of the contracts signed and the concomitant risk for renegotiation. The overall conclusion is that there is no easy yes or no answer to the question of whether PPP constructs are optimal. Rather, the preconditions for projects differ calling for a wide variety of solutions tailored to circumstances (A). For the covering abstract of the conference see ITRD E212343.
Abstract