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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Littlechild, S.C., 2001.
"Competitive Bidding for a Long-term Electricity Distribution Contract,"
Cambridge Working Papers in Economics
0112, Faculty of Economics, University of Cambridge.
- Littlechild Stephen, 2002. "Competitive Bidding for a Long-Term Electricity Distribution Contract," Review of Network Economics, De Gruyter, vol. 1(1), pages 1-38, March.
- Boardman, Anthony E & Vining, Aidan R, 1989. "Ownership and Performance in Competitive Environments: A Comparison of the Performance of Private, Mixed, and State-Owned Enterprises," Journal of Law and Economics, University of Chicago Press, vol. 32(1), pages 1-33, April.
- Baldwin, Robert & Cave, Martin & Lodge, Martin, 2011.
"Understanding Regulation: Theory, Strategy, and Practice,"
Oxford University Press,
edition 2, number 9780199576098, September.
- Baldwin, Robert & Cave, Martin, 1999. "Understanding Regulation: Theory, Strategy, and Practice," OUP Catalogue, Oxford University Press, number 9780198774389, September.
- Eduardo M. R. A. Engel & Ronald D. Fischer & Alexander Galetovic, 2001.
"Least-Present-Value-of-Revenue Auctions and Highway Franchising,"
Journal of Political Economy,
University of Chicago Press, vol. 109(5), pages 993-1020, October.
- Eduardo Engel & Ronald Fischer & Alexander Galetovic, 1998. "Least-Present-Value-of-Revenue Auctions and Highway Franchising," Documentos de Trabajo 37, Centro de Economía Aplicada, Universidad de Chile.
- Eduardo M.R.A. Engel & Ronald D. Fischer & Alexander Galetovic, 1998. "Least-Present-Value-of-Revenue Auctions and Highway Franchising," NBER Working Papers 6689, National Bureau of Economic Research, Inc.
- Patrick Bajari & Stephanie Houghton & Steve Tadelis, 2006. "Bidding for Incomplete Contracts: An Empirical Analysis," NBER Working Papers 12051, National Bureau of Economic Research, Inc.
- G. Bognetti & L. Robotti, 2007. "The Provision Of Local Public Services Through Mixed Enterprises: The Italian Case," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 78(3), pages 415-437, 09.
- Eckel, Catherine C & Vining, Aidan R, 1985. "Elements of a Theory of Mixed Enterprise," Scottish Journal of Political Economy, Scottish Economic Society, vol. 32(1), pages 82-94, February.
- Robert D. Willig, 1978. "Pareto-Superior Nonlinear Outlay Schedules," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 56-69, Spring.
- Frédéric Boehm & Juanita Olaya, 2006. "Corruption In Public Contracting Auctions: The Role Of Transparency In Bidding Processes," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 77(4), pages 431-452, December.
- Crampes, C. & Estache, A., 1997.
"Regulatory Trade-Offs in the Design of Concession Contracts,"
97.462, Toulouse - GREMAQ.
- Crampes, Claude & Estache, Antonio, 1998. "Regulatory trade-offs in the design of concession contracts," Utilities Policy, Elsevier, vol. 7(1), pages 1-13, March.
- Alessandro MARRA, 2007. "Internal Regulation By Mixed Enterprises: The Case Of The Italian Water Sector," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 78(2), pages 245-275, 06.
- Antonio Estache, 2006. "PPI Partnerships vs. PPI Divorces in LDCs," Review of Industrial Organization, Springer, vol. 29(1), pages 3-26, September.
- J. Luis Guasch, 2004. "Granting and Renegotiating Infrastructure Concessions : Doing it Right," World Bank Publications, The World Bank, number 15024.
- Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, December.
- Klein, Michael, 1998. "Bidding for concessions," Policy Research Working Paper Series 1957, The World Bank.
- Miranda Sarmento, J. & Renneboog, L.D.R., 2014. "The Portuguese Experience with Public-Private Partnerships," Discussion Paper 2014-005, Tilburg University, Center for Economic Research.
- Carvalho, João & Cruz, Nuno & Cunha Marques, Rui, 2010. "Local governments opting for PPPs in the schools sector," MPRA Paper 22558, University Library of Munich, Germany.
- Nuno Ferreira da Cruz & Pedro Simões & Rui Cunha Marques, 2013. "The hurdles of local governments with PPP contracts in the waste sector," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 31(2), pages 292-307, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.