Understanding pre-contractual transaction costs for Public–Private Partnership infrastructure projects

While public entities are still increasingly interested in Public-Private Partnerships (PPPs), we recently observe increasing reluctance from private partners to engage in PPP-bidding. Up-front costs that PPP bidders make, are considered too high compared to the bidding chances, and may result in less bidders in the future. In this paper, we empirically analyze transaction costs of PPPs in the pre-contractual stage and compare these to similar costs borne by private partners for traditional public procurement. Statistical analyses based on sample of 172 public infrastructure projects enable the estimation of the pre-contractual cost burden. Based on the study results, suggestions are made to lower these costs or to improve the cost position of the private sector, in order to safeguard the competitive setting of the PPP market.

Publication year:2015

Keywords:Transaction cost economics, Public-Private Partnership, Public procurement, Bidding, Statistical analysis

CSS-citation score:2