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Risk allocation and incentives for private contractors: an analysis of Italian project financing contracts

Author

Listed:
  • Rosalba Cori

    (Presidenza del Consiglio dei Ministri)

  • Cristina Giorgiantonio

    (Bank of Italy)

  • Ilaria Paradisi

    (Presidenza del Consiglio dei Ministri)

Abstract

Based on the economic literature and international comparison, the paper examines the adequacy of the terms of Italian project financing contracts to build and operate public works, and identifies potential areas for improvement. We analyze the main contractual content of the public works construction and management concessions submitted to the Project Financing Technical Unit with a view to monitoring public-private contract partnerships. Overall, the analysis reveals the backwardness of the Italian system and the existence of not insignificant problem areas. The survey supports the need to foster adequate standardization of contracts in Italy aimed, in particular, at ensuring: i) the provision of more appropriate mechanisms for the employment of penalties for breach of contract by the concessionaire, especially in the management phase, and � conversely � of reward mechanisms; ii) the inclusion of clauses relative to the sharing of financing documents by the contracting authorities; iii) appropriate attention to the quantitative elements of the business plan; and iv) the strengthening of supervisory activity of the grantor during the various phases of the contract.

Suggested Citation

  • Rosalba Cori & Cristina Giorgiantonio & Ilaria Paradisi, 2010. "Risk allocation and incentives for private contractors: an analysis of Italian project financing contracts," Questioni di Economia e Finanza (Occasional Papers) 82, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_82_10
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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2010-0082/QEF_82.pdf
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    References listed on IDEAS

    as
    1. David Martimort & Flavio Menezes & Myrna Wooders & ELISABETTA IOSSA & DAVID MARTIMORT, 2015. "The Simple Microeconomics of Public-Private Partnerships," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(1), pages 4-48, February.
    2. Elisabetta Iossa & Federico Antellini Russo, 2008. "Potenzialità e criticità del Partenariato Pubblico Privato in Italia," Rivista di Politica Economica, SIPI Spa, vol. 98(3), pages 125-158, May-June.
    3. Gregory Lewis & Patrick Bajari, 2011. "Procurement Contracting With Time Incentives: Theory and Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(3), pages 1173-1211.
    4. Kappeler, Andreas & Nemoz, Mathieu, 2010. "Public-Private Partnerships in Europe - Before and During the Recent Financial Crisis," Economic and Financial Reports 2010/4, European Investment Bank, Economics Department.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Copiello, Sergio, 2015. "Achieving affordable housing through energy efficiency strategy," Energy Policy, Elsevier, vol. 85(C), pages 288-298.
    2. Salvatore Russo, 2013. "The swing of public-private partnership in the Italian hospitals. A comparative analysis of two case studies," Working Papers 21, Venice School of Management - Department of Management, Università Ca' Foscari Venezia.
    3. Iossa, Elisabetta & Martimort, David, 2016. "Corruption in PPPs, incentives and contract incompleteness," International Journal of Industrial Organization, Elsevier, vol. 44(C), pages 85-100.
    4. repec:bri:cmpowp:13/325 is not listed on IDEAS

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    More about this item

    Keywords

    project financing; regulation; risk allocation;
    All these keywords.

    JEL classification:

    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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