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Transaction Costs In Public-Private Partnerships: A First Look At The Evidence

Author

Listed:
  • Dudkin, Gerti

    (Helsinki School of Economics)

  • Valila, Timo

    () (European Investment Bank, Economic and Financial Studies)

Abstract

This paper presents the results of one of the first systematic analyses of the magnitude and determinants of transaction costs in public-private partnerships (PPPs). Given limited data availability, the analysis is confined to procurement-phase costs of bidding and contract negotiation, thus excluding costs related to contract monitoring and renegotiation in the operational phase. Notably, no attempt is made to compare transaction costs in PPPs to those in traditional public procurement of investment projects, nor to compare them to cost savings achieved through PPPs. Even so, some interesting results emerge. As regards the level of transaction costs in the procurement phase, it is estimated that the total costs amount on average to well over 10 percent of the capital value of the project. Transaction costs to the public sector and the winning bidder vary between countries (legal systems) and sectors, and they are significantly higher in small projects (below ã25 million) and in projects that take long (over 50 months) to procure. In contrast, neither experience in setting up partnerships nor the number of bidders affect the costs to the public sector and the winning bidder.

Suggested Citation

  • Dudkin, Gerti & Valila, Timo, 2005. "Transaction Costs In Public-Private Partnerships: A First Look At The Evidence," Economic and Financial Reports 2005/3, European Investment Bank, Economics Department.
  • Handle: RePEc:ris:eibefr:2005_003
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    References listed on IDEAS

    as
    1. Leahy, Patricia, 2005. "Lessons from the Private Finance Initiative in the United Kingdom," EIB Papers 8/2005, European Investment Bank, Economics Department.
    2. Lourdes Torres & Vicente Pina, 2001. "Public-private partnership and private finance initiatives in the EU and Spanish local governments," European Accounting Review, Taylor & Francis Journals, vol. 10(3), pages 601-619.
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    Cited by:

    1. Lechosław Rojewski, 2008. "Contracting and Transaction Costs in the Public-Private Partnership. A Conception in the Light of the New Institutional Economy," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 21.
    2. Krzysztof Wasowski, 2013. "Analiza wspolpracy sektora publicznego z doradcami zewnetrznymi w realizacji projektow w systemie koncesyjnym oraz w formie partnerstwa publiczno-prywatnego w Polsce (Analysis of public sector coopera," Problemy Zarzadzania, University of Warsaw, Faculty of Management, vol. 11(43), pages 136-155.
    3. repec:cpn:umkeip:v:16:y:2017:i:3:p:325-341 is not listed on IDEAS
    4. Fandel, Günter & Giese, Anke & Mohn, Brigitte, 2012. "Measuring synergy effects of a Public Social Private Partnership (PSPP) project," International Journal of Production Economics, Elsevier, vol. 140(2), pages 815-824.
    5. repec:taf:conmgt:v:35:y:2017:i:10:p:627-640 is not listed on IDEAS
    6. Vecchi, Veronica & Hellowell, Mark & Gatti, Stefano, 2013. "Does the private sector receive an excessive return from investments in health care infrastructure projects? Evidence from the UK," Health Policy, Elsevier, vol. 110(2), pages 243-270.
    7. Mohammed A. Rajeh & John E. Tookey & James Olabode Bamidele Rotimi, 2015. "Developing a procurement path determination chart SEM-based approach," Construction Management and Economics, Taylor & Francis Journals, vol. 33(11-12), pages 921-941, December.

    More about this item

    Keywords

    Public-private partnership; transaction costs; procurement;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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