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Global Developments in Public Infrastructure Procurement

Evaluating Public–Private Partnerships and Other Procurement Options

Darrin Grimsey and Mervyn K. Lewis

There is widespread acceptance of the importance of infrastructure, but less agreement about how it should be funded and procured. While most public infrastructure is still provided in-house or by traditional procurement methods – with well-researched strengths and weaknesses – the development of service concession arrangements has seen a greater emphasis on lifecycle costing, risk assessment and asset design as featured in a variety of public private partnership (PPP) delivery models. This book examines the various procurement approaches, and provides a framework for comparing their advantages and disadvantages. Drawing on international experience, it considers some of the best and worst examples of PPPs, and infrastructure projects generally, along with the lessons for improving infrastructure procurement processes.
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Chapter 2: Why is infrastructure of such significance?

Evaluating Public–Private Partnerships and Other Procurement Options

Darrin Grimsey and Mervyn K. Lewis

Extract

Since this volume is concerned with public infrastructure we need to make clear in this chapter what this term comprises. Infrastructure used to be seen as the tangible capital stock owned by the public sector. Now, it embraces intangibles such as personal entrepreneurial or commercial skills and the legal system and business culture. Moreover, many tangible capital assets, such as ports, power networks, water and telecommunications are in private hands. Despite the significant role of private ownership of infrastructure, there exists the belief that public infrastructure is an area in which government economic and social policy is required, and that public infrastructure is different from most other goods and services in the market due to network services, public goods, externalities, scale and monopolistic elements, even when procured under public-private partnerships (PPPs) and concessions. Infrastructure is seen as having a disproportionate impact on the economy, and the chapter then reviews econometric and other evidence of the productivity of public investment. These studies have been bedevilled by the problem of two-way causation: that is, does public investment lead or follow economic development? In this respect, a particularly instructive example comes from China in terms of the consequences of a new railway for regional development. The chapter concludes with eight different dimensions that delineate the significance of infrastructure investment.

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