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A Dysfunctional Legal Framework for Failed Public–Private Partnership Projects: Accounting or Economics?

Author

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  • Vicente Alcaraz Carrillo de Albornoz

    (Ingeniería Civil: Construcción, Universidad Politécnica de Madrid, Aranguren 3, 28040 Madrid, Spain)

  • Juan Molina Millán

    (Ingeniería Civil: Construcción, Universidad Politécnica de Madrid, Aranguren 3, 28040 Madrid, Spain)

  • Antonio Lorenzo Lara Galera

    (Ingeniería Civil: Construcción, Universidad Politécnica de Madrid, Aranguren 3, 28040 Madrid, Spain)

  • Belén Muñoz-Medina

    (Ingeniería Civil: Construcción, Universidad Politécnica de Madrid, Aranguren 3, 28040 Madrid, Spain)

Abstract

Public–private partnerships (PPP) are complex long-term arrangements used in public infrastructure, public services or public facilities projects. To ensure that PPPs transfer enough risk to the private sector, European directives first and member states’ national legal frameworks later have modified how these projects are treated in the event of early termination. This paper aims to analyze said changes to determine if they well serve the public interest. The analysis is done by mapping the different alternatives a granting authority has when confronted with a PPP early termination, as stated by the law. We illustrate our analysis with a case study: The Móstoles-Navalcarnero railway, a Spanish PPP project that came to early termination during the construction stage. For this project, we determine the options available to the granting authority with the old Spanish legal framework (in force at the time the project was awarded) and with the new Spanish legal framework.

Suggested Citation

  • Vicente Alcaraz Carrillo de Albornoz & Juan Molina Millán & Antonio Lorenzo Lara Galera & Belén Muñoz-Medina, 2022. "A Dysfunctional Legal Framework for Failed Public–Private Partnership Projects: Accounting or Economics?," Social Sciences, MDPI, vol. 11(12), pages 1-12, November.
    • Handle: RePEc:gam:jscscx:v:11:y:2022:i:12:p:554-:d:986474
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    References listed on IDEAS

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    1. Stefano Caselli & Stefano Gatti & Antonio Marciante, 2009. "Pricing Final Indemnification Payments to Private Sponsors in Project‐Financed Public‐Private Partnerships: An Application of Real Options Valuation," Journal of Applied Corporate Finance, Morgan Stanley, vol. 21(3), pages 95-106, June.
    2. Bent Flyvbjerg, 2013. "Quality Control and Due Diligence in Project Management: Getting Decisions Right by Taking the Outside View," Papers 1302.2544, arXiv.org.
    3. Darrin Grimsey & Mervyn K. Lewis, 2005. "Are Public Private Partnerships value for money?," Accounting Forum, Taylor & Francis Journals, vol. 29(4), pages 345-378, December.
    4. Paul L. Posner & Shin Kue Ryu & Ann Tkachenko, 2009. "Public-private partnerships: The relevance of budgeting," OECD Journal on Budgeting, OECD Publishing, vol. 9(1), pages 1-26.
    5. John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
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