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Renegotiating Public-Private Partnerships

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  • Miranda Sarmento, J.J.

    (Tilburg University, School of Economics and Management)

  • Renneboog, Luc

    (Tilburg University, School of Economics and Management)

Abstract

Public-Private Partnerships (PPPs) are frequently renegotiated as their contracts are long-term, often with a duration exceeding 30 years, involve major investments, and are necessary incomplete. Still, while contract incompleteness is difficult to prevent, renegotiation frequency does not decline in spite of decades of experience. Electoral cycles and political connections lead to strategic behaviour by both the public sector, intending to please the electorate, and the private entity, often taking advantage of the fact that the government cannot afford disruption in public services prior to elections. The bargaining power is held mainly by private firms/corporate consortiums who extract additional rents to compensate for underbidding at the initial bidding rounds. When a consortium dominated by a foreign firm, the frequency of negotiations is higher but the extraction of rents from renegotiations is lower, reflecting a lower degree of political connectedness. Experience with PPP projects does not reduce the likelihood of subsequent renegotiations. In spite of the recommendations of the PPP supervisor (the Court of Audit), the public sector has not implemented improvements in contract design and renegotiations clauses of PPP contracts.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Miranda Sarmento, J.J. & Renneboog, Luc, 2017. "Renegotiating Public-Private Partnerships," Other publications TiSEM 1979123d-90c5-4ee4-813b-8, Tilburg University, School of Economics and Management.
  • Handle: RePEc:tiu:tiutis:1979123d-90c5-4ee4-813b-8f7b28acd004
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    Cited by:

    1. Fleta-Asín, Jorge & Muñoz, Fernando, 2023. "When bigger is better: Investment volume drivers in infrastructure public-private partnership projects," Socio-Economic Planning Sciences, Elsevier, vol. 86(C).
    2. Dimas de Castro e Silva Neto & Carlos Oliveira Cruz & Joaquim Miranda Sarmento, 2017. "Understanding the patterns of PPP renegotiations for infrastructure projects in Latin America," Competition and Regulation in Network Industries, , vol. 18(3-4), pages 271-296, September.
    3. Mochon, Pablo & Mochon, Asuncion & Saez, Yago, 2022. "Combinatorial versus sequential auctions to allocate PPP highway projects," Transport Policy, Elsevier, vol. 117(C), pages 23-39.
    4. Mark A. Moore & Aidan R. Vining, 2023. "PPP performance evaluation: the social welfare goal, principal–agent theory and political economy," Policy Sciences, Springer;Society of Policy Sciences, vol. 56(2), pages 267-299, June.
    5. Laura Garrido & José Manuel Vassallo, 2020. "Is Ex-Post Fiscal Support to PPPs Sustainable? Analysis of Government Loans Granted to Shadow-Toll Roads in Spain: A Case Study," Sustainability, MDPI, vol. 13(1), pages 1-23, December.
    6. Carlos Oliveira Cruz & Joaquim Miranda Sarmento, 2017. "Reforming traditional PPP models to cope with the challenges of smart cities," Competition and Regulation in Network Industries, , vol. 18(1-2), pages 94-114, March.

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