Once concessioned, twice shy? Asymmetries of “reconcession” in national PPP programs

In Public-Private Partnerships, theoretically, once the concession period finishes, the infrastructure should be transferred back to the public sector. However, governments are prompt to promote reconcessions by rebidding PPPs. The implications of reconcessioning a PPP that has undergone a previous concession have not been thoroughly considered in the literature. This study develops a System Dynamics (SD) model to examine the implications of reconcession in a national user-pay PPP program over the last 30 years aiming to provide a tool for decision-makers to understand the interrelations between reconcessions and the main PPP outcomes. This model explores the implications of periodical reconcessions by unravelling five asymmetries derived from reconcessions and assesses their impacts on longer average concession periods, higher project expenditures, higher user fees, lower uncertainty and reduced demand volatility. Findings have important implications for PPP policymakers who should thoroughly consider reconcessions implications on PPP program expenses and reliance on user revenues that may trigger erosion of social legitimacy and potential program closure due to user fee increases, demand elasticity, and demand volatility when making decisions about reconcessions in PPP programs. The model’s reliability is tested based on a national toll road PPP program including more than 60 projects.