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Value for Money framework for managing the renegotiation of Public Private Partnership projects

Author

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  • Anil Kashyap
  • O. P. Agarwal

Abstract

India’s Infrastructure sector has witnessed a significant slowdown in the recent past characterised by delay in several projects with some of them becoming unviable due to various reasons such as aggressive bidding, sluggish economy, delays in environmental and regulatory clearances, land acquisition issues, delay in dispute resolution and lack of adequate credit support, among others. This has resulted in massive losses for private infrastructure companies, putting some of them under significant financial stress. While lenders are doing their bit to re-structure the financing arrangement for such projects, renegotiating terms of public-private-partnership (PPP) contracts may prove to be a significant driver to get some of the projects back on track.As a global phenomenon, World Bank (2004) on more than 1,000 PPP projects in Latin America between 1985 and 2000 found that almost 41.5%of all PPP projects had to be renegotiated. The study states that most renegotiated contracts underwent negotiation within two years of their award, and 85%of renegotiations occurred within four years of the initial award of a contract. These facts highlighting renegotiation within such a short period of contract award is indicative of aggressive bidding or faulty contract design.The paper would discuss as the PPP landscape expands and India further establishes itself as a matured PPP market, new challenges and opportunities that will continue to emerge. These include innovative financing techniques to reduce cost to public authorities, improved project delivery techniques that can reduce cost of construction and ensure timely completion of projects meeting the desired quality benchmarks. Besides renegotiation, the government, to ward off allegations or litigation from bidders who lose out in the first stage by creating credible institutional mechanisms.

Suggested Citation

  • Anil Kashyap & O. P. Agarwal, 2017. "Value for Money framework for managing the renegotiation of Public Private Partnership projects," ERES eres2017_258, European Real Estate Society (ERES).
  • Handle: RePEc:arz:wpaper:eres2017_258
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    More about this item

    Keywords

    aggressive bidding; Institutional Mechanisms; Ppp; renegotiation;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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