Revisiting the strengths and limitations of regulatory contracts in infrastructure industries
AbstractThis paper evaluates regulation by contract in public-private partnerships (PPPs) in infrastructure services. Although the benefits of competition for the market and of regulatory contracts are widely acknowledged, the literature indentifies several failures in their design. These ‘flaws’ are present in both developed and developing countries and arise in all types of contracts. This study analyses both short and long term contracts, focusing on purely contractual PPPs and institutionalized PPPs (mixed companies). The evidence suggests that for all kinds of contracts, the major problems tend to arise in the preparation of public tender documents: the ‘best’ bidder is not often the winner. The likely results include redistribution in favor of the private partner, weak incentives for high performance, and renegotiation of contracts. Moreover, risks are not allocated correctly nor is effective monitoring ensured. This review of contract procedures and design allows us to draw several implications for policy-makers and to present suggestions and recommendations for improving regulatory contracts.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 32890.
Date of creation: 2010
Date of revision:
Publication status: Published in Journal of Infrastructure Systems 4.16(2010): pp. 334-342
regulation by contract; bidding documents; contract design; risk; monitoring;
Find related papers by JEL classification:
- L5 - Industrial Organization - - Regulation and Industrial Policy
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