Edited by Michiel Bliemer, Corinne Mulley and Claudine J. Moutou
Chapter 14: Risk-sharing in public–private partnerships: a contractual economics perspective
Public–private partnerships (PPPs) are an innovative way of government contracting in which the private sector is responsible for the delivery of infrastructure and related services, in exchange for a stream of payments (Hodges and Mellett 2005; English and Baxter 2010). Typically, the private sector partner designs, builds, finances and operates a significant capital asset, such as a prison, a road, a hospital or a school, ensuring the availability of the asset during the contract period and providing related services of an acceptable standard (Chung 2009). In PPP toll road contracts, for example, the private sector partner retains a high level of managerial autonomy from the daily management activities of the road to customer service and billing, and derives payments from the end users of the service. The public sector partner engages primarily in monitoring and enforcement functions – verifying private sector partner’s adherence to contractual obligations such as investment, pricing, and service quality (Kivleniece and Quelin 2012).
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