Value for Money and Risk in Public–Private Partnerships

Problem, research strategy, and findings: Delivering improved public services at lower cost, also known formally as value for money (VfM), is often the main rationale for procuring large infrastructure projects through public–private partnerships (PPPs). However, it is unclear whether the ex ante assessments of PPPs account for key planning concerns, including limitations on community consultation, contractual lock-ins that curtail public flexibility to make future plans, and a political preference for PPPs that may influence the way that projects are structured and evaluated. This set of questions is examined for 28 infrastructure PPPs delivered in Ontario, Canada, and interviews with18 senior political, government, and private-sector participants in the province's PPP industry. We find that transferring of construction risks from government to the private-sector partners drives VfM results, and may overvalue the extent to which planning related risks can be transferred.

Takeaway for practice: PPP contract structures should permit more transparency during the project planning process and preserve the flexibility of governments to control key planning tasks such as user fees, service coordination and facility expansion. Strategies might include: the unbundling of construction and operation phases of the PPP in all but the most unique situations, the use of competitive dialogue tendering to deepen public–private collaboration earlier in the planning process, and the inclusion of contract rebalancing terms to better share rather than transfer project risks.

Research support: This research was funded through a Standard Research Grant from the Social Sciences and Humanities Research Council of Canada (Application Number: 110998).     

The influence of governance on the implementation of Public-Private Partnerships in the United Kingdom and China: A systematic comparison

Although Public-Private Partnerships (PPPs) have been widely implemented in a number of countries, their development and governance contexts are different. This research investigates PPPs through the lens of governmentality and develops a systematic and innovative analytical framework to evaluate and compare the PPP governance in China and the United Kingdom. Based on the findings, a conceptual model is proposed to illustrate the conducting of PPP governance, by the governments involved. The research contributes to the literature on the governance of PPP by providing a clear framework and an assessment tool. The result can benefit the policymakers in different countries, in assessing and improving the efficiency and effectiveness of their PPP governance in practice, hence helping the decision-making of government in identifying and targeting loopholes in their PPP market.     

Stakeholder dynamics and responsibilities in Public–Private Partnerships: A mixed experience

Although stakeholder management is seen as one of the main success factors of Public–Private Partnerships (PPPs), to date, limited research has investigated actual stakeholder management in PPPs. After positioning PPP in the current stakeholder management theory, a comparative case study analysis of four PPP infrastructure projects demonstrates the relevance and importance of stakeholder inclusion in PPPs. The case study findings indicate that a PPP makes the stakeholder environment more complex to manage, due to the increasing importance of the stakeholder context and dynamics. Hence, allocating stakeholder responsibilities between the public initiator and private consortium becomes problematic as it goes hand in hand with balancing between reactive and proactive responses to stakeholder claims. In order to cope with the PPP specific stakeholder characteristics, the use of a dynamic dual stakeholder management tool is recommended as well as the identification of governance structures that allow the sharing and division of responsibilities between stakeholders.     

Public-private partnerships in the water sector: A review

Public-private partnerships (PPPs) offer possible solutions for governments seeking to achieve better value for money and fund the investments needed to provide infrastructure and manage public services. Water-sector projects demand extensive, up-front and sunk investments, and inefficiency levels are often significant. This study conducted a systematic review of previous research on water sector PPP projects. The research design is innovative in that it relied on a hybrid methodology combining systematic quantitative, semantic network and narrative analyses. The literature review protocol applied found 122 relevant studies published in top journals. Five key topics within water-related PPP studies were identified: risk management, PPP contractual arrangements, financing and tariffs, infrastructure, and governance. The most important topic is risk management, within which individual scholars’ contributions were tracked. However, a consensus has not been reached about the best risk matrix for improving PPP contracts in the water sector.     

Future proofing PPPs: Life-cycle performance measurement and Building Information Modelling

Public–private partnerships (PPPs) are widely used to procure public infrastructure assets and are an effective mechanism for ensuring value for money. However, many PPPs in Australia have been plagued with controversy as they have experienced significant cost and schedule overruns during construction. Critical to the successful delivery of PPP projects is effective performance measurement/evaluation. Yet, conventional ex-post evaluation that solely focuses on meeting budget and a predetermined schedule are invariably applied to measure PPPs in practice. This paper reviews the performance measurement literature used to evaluate PPP projects and proposes that a life-cycle approach to their evaluation is needed to ‘future proof’ their performance and ensure value for money that is delivered to the public sector. As the primary focus of PPPs is to maximise profitability, there is a need to ameliorate the coordination and integration between the Special Purpose Vehicle, end-users and the public sector. This can be enabled through the adoption of Building Information Modelling (BIM) as it not only provides digital representation of the physical and functional characteristics of an asset, but also provides key decision makers with the ability to make informed decisions across a project's life-cycle. When aligned with a series of core indicators that are used for performance measurement, it is suggested that BIM can act as a catalyst for ‘future proofing’ PPPs and enable the successful management of an asset throughout its life-cycle.     

Flexibility in PPP contracts – Dealing with potential change in the pre-contract phase of a construction project

Public Private Partnerships (PPPs) cover a range of possible relationships between public and private parties. PPP contracts are typically used in contexts of great uncertainty, such as large construction and infrastructure projects that are realized over a longer period of time. Hence, a major challenge in PPPs is to keep construction progress cost-efficient and on schedule, under continuously changing circumstances. One way to achieve this is through clever contracting, by proactively anticipating potential change in the planning phase and providing flexible contract mechanisms that enable an effective response. The purpose of this article is to discuss potential changes and the subsequent requirement of flexibility in PPP contracts. By flexibility, we mean the ability of the contract to deal with changing circumstances. We set out to do so by studying the available literature on the subject and by analysing the case study of the Blankenburgverbinding in the Netherlands, a Design, Build, Finance and Maintain (DBFM) project that is currently in its planning phase based on 32 interviews. Our main findings are that the timely and accurate recognition of potential changes, combined with the availability of flexible coping mechanisms, provide the stakeholders with a better understanding of the challenges they face in realizing their aims in the pre-contract phase of projects. This understanding helps to better prepare a PPP contract for potential changes.     

Reinforcing relationships for resilience – by embedding end-user ‘people’ in public–private partnerships

Public–private partnerships (PPPs) target overall benefits from mobilising private resources in delivering public infrastructure. Their longer time spans generate higher risks, hence the greater need for resilience in PPPs, compared to traditional procurement. PPP infrastructure outcomes should include both sustainable and resilient built infrastructure, as well as reliable and resilient service delivery. The public–private cross-sectoral relationships can be significant contributors to resilience. Previous research findings show that public–private relationships are still predominantly formal in PPPs. However, appropriate informal relationships can foster mutual trust and better teamworking that trigger self-adjustment mechanisms to overcome adversities and enhance resilience. Integrating relevant ‘people’ into PPPs to establish a public–private–people partnership (4P) is proposed to reinforce formal–informal relationships, while enhancing relevant ‘social infrastructure’, which could then lead to more resilient and better ‘value for money’ built infrastructure. Findings from another recent study demonstrate the value of 4P in pre-disaster planning. 4P also helps to develop resilient ‘social infrastructure’ for post-disaster reconstruction of sustainable built infrastructure. Conceptual diagrams are developed to summarise how the 4th P could reinforce public–private relationships and inject resilience into a potentially unstable PPP system.     

基础设施PPP项目残值风险的界定研究

从PPP模式在我国的应用现状出发,阐述残值风险研究的重要意义;通过文献研究,确定残值风险的定义与内涵;最后通过分析国内外现有PPP模式的标准合同范本,研究基础设施PPP项目残值风险的处理现状,并提出一定的建议。     

Closing capability gaps for procuring infrastructure public-private partnerships: A case study in China

This paper explores how public sector owners (PSOs) close capability gaps between existing capabilities and required capabilities when first entering into infrastructure Public-Private Partnerships (PPPs). Drawing on the dynamic capabilities view and research on owner project capabilities, the paper presents an exploratory in-depth case study of a state-owned enterprise in China, as it was in the process of initiating PPP metro line projects for the first time. The findings show that PSOs closed capability gaps by obtaining owner strategic, commercial and governance capabilities at the initial phase of PPP procurement. This process was undertaken through a combination of acquiring capabilities externally and developing capabilities internally. The study contributes to the literesture on capability development and sheds light on the conditions when and where internal capability development and external capability acquisition are integrated to close capability gaps for procuring infrastructure PPPs.     

Large-scale public venue development and the application of Public–Private Partnerships (PPPs)

Large-scale venues for exhibitions and events are important public infrastructure. Developing venues have captured much of governments' attention due to the potential benefits the industry would bring to the community. However, venue development requires considerable capital and operating costs, unique standards of design and complicated operational issues. Public–Private Partnerships were introduced by governments as innovative delivery models to bring forward venue projects. This paper presents comparative case studies of two PPP venue projects in Hong Kong Special Administrative Region and New Zealand aiming to investigate key challenges for using PPPs in venue development and propose strategies to address the problems and assist future planning and organization for venue PPPs. The research shows that for a successful venue PPP, the following are critical features: (1) sound business case development; (2) streamlined financial arrangements; (3) robust tendering; (4) effective governance structure and partnership-based consortium; and (5) realistic risk allocation.     

An integrated ecosystem model for understanding infrastructure PPPs

To overcome the seemingly chronic funding gap for public infrastructure investments, well over thousand Public-Private Partnerships (PPPs) have been carried out around the world with varying success in terms of investor returns and socio-economic sustainability. This paper proposes an integrated model that assesses PPP projects at three levels of observation: i) the market; ii) the cash-flow of a project; and iii) the ecosystem around PPPs. The aim is to build a more holistic yet comprehensible framework that links these three levels to better understand PPPs especially in the context of infrastructure projects. It can also be modified to fit multiple contexts and used as a tool for analysing PPPs in their early stages.     

Critical success factors for PPP/PFI projects in the UK construction industry

Public–private partnerships (PPPs) are increasingly used in the United Kingdom's public facilities and services provision through the Private Finance Initiative (PFI). Despite some casualties, PPP/PFI projects have been undertaken successfully, but the reasons for success are not entirely clear. Questionnaire survey research examined the relative importance of 18 potential critical success factors (CSF) for PPP/PFI construction projects in the UK. The results show that the three most important factors are: ‘a strong and good private consortium’, ‘appropriate risk allocation’ and ‘available financial market’. Factor analysis revealed that appropriate factor groupings for the 18 CSFs are: effective procurement, project implementability, government guarantee, favourable economic conditions and available financial market. These findings should influence policy development towards PPPs and the manner in which partners go about the development of PFI projects.     

A strategic analysis of contract termination in public–private partnerships: implications from cases in sub-Saharan Africa

The paper examines empirically what contributes to the problem of contract termination in public–private partnerships (PPPs) from the perspectives of theories on contracts, transaction costs and industrial organizations. Based on a theoretical exploration of a model of the holdup and underinvestment problems, we identified the profit-sharing mechanism as the contract type that most predisposes a PPP to the inefficiencies that lead to contract termination. We then conducted an empirical examination of a data-set of PPP contracts in sub-Saharan Africa. Using rough sets theory and the logic of explanatory power, we found that contract type outweighs other factors, such as sector and nationality, in the explanation of contract termination.     

Root causes of conflict and conflict resolution mechanisms in public-private partnerships: Comparative study between Ghana and China

Conflict is inevitable in public-private partnership (PPP) due to the long-term agreement and multiplicity of stakeholders with varying beliefs and interests. However, a thorough understanding of the root causes of conflict beforehand helps to minimize conflict occurrence, thereby ensuring a smooth PPP process. This paper aims to explore and evaluate the root causes of conflicts in PPPs through a comparative study between Ghana and China. Further, the most suitable conflict resolution mechanisms are explored from the Ghanaian and Chinese perspectives. Results show that causes of conflict ranked higher in Ghana directly relate to poor governance and contract arrangement, whereas causes related to poor risk management and communication are ranked higher in China. Further, arbitration and negotiation are the most suitable conflict resolution mechanisms for PPPs in Ghana and China respectively. The outputs of this study inform international private investors interested in PPPs in Africa and China of the possible sources of disputes and resolution mechanisms in PPPs. This will enable international investors to develop strategic measures before entering into the PPP markets of both regions.     

Including prospective tenants and homeowners in the urban development process in Finland

The twofold purpose of this paper is to establish the prospective inhabitants as a part of the development process, and to provide an overview of participatory planning in the context of Finnish urban residential public?Cprivate partnerships (PPPs). This overview examines how the future inhabitants of new residential developments can contribute to informed decision-making within a PPP framework. Communicative planning theory serves as a framework to compare the urban development process from the point of view of future inhabitants. Finnish case studies are used to compare the traditional public-led processes with processes based on PPPs. This comparison is discussed within the context of PPPs and how they may evolve further and develop into a public?Cprivate-people partnership (4P) model. The examination of the case studies suggests that involving future inhabitants as stakeholders in the urban planning development process would lead to and require new methods of participation. These methods potentially impact the PPP process as a whole and on several levels. In the Finnish examples discussed here, these range from elements of general planning to individual house design. The research, whilst drawing on the broad field of PPP research, is based on Finnish case studies only. However, this research suggests that the 4P approach is a practical model which may fill the gap between international PPP theory and local, practical solutions for the planning of urban development, both in Finland and elsewhere. Future research can look at this model in other PPP jurisdictions and contexts. The 4P model can be used to establish new methods to plan and develop local infrastructure which meets the needs of future inhabitants. The findings of this paper emphasise the crucial role of future inhabitants in the PPP process. The conclusions points out the possibilities for broad and open participation in urban planning and development processes. The 4P model is found to be a potentially valuable theoretical and practical concept for use in PPP urban developments.     

Types and functions of special purpose vehicles in infrastructure megaprojects

Special Purpose Vehicles (SPVs) are legal instruments, widely employed in infrastructure megaprojects. SPVs support specific transactions, including public-private partnerships and project finance. Despite the widespread use of SPVs, there is limited research concerning their importance and role for project governance. Furthermore, project studies don't distinguish between the different types of SPVs. This paper employs a grounded theory approach to understand the four types of SPVs and their functions for transactions in infrastructure megaprojects. This paper shows that specific types of SPVs, called project companies and industrial vehicles, are relevant for the formal governance of infrastructure megaproject. The paper describes the hybrid nature of SPVs, being between corporations and contracts, and discusses the implications for the transaction cost theory. A better understanding of the types and functions of SPVs will facilitate and enhance the design and negotiation of the formal governance of infrastructure megaprojects.     

Institutional entrepreneurship and infrastructure public-private partnership (PPP): Unpacking the role of social actors in implementing PPP projects

The current infrastructure public-private partnership (PPP) literature overstates the mechanistic requirements of PPPs, but overlooks the social dynamics underlying their implementation. The current study addresses this gap by exploring the activities and strategies several social actors deployed to initiate and implement an airport PPP project in Saudi Arabia. By connecting insights from the PPP and institutional entrepreneurship literatures, two main contributions are made. First, it is demonstrated that the process of institutional entrepreneurship goes well beyond the agentic powers of a few institutional entrepreneurs, and entails the collaborative actions of several actors working across multiple institutional fields. Second, the study emphasizes the importance of theorizing the implementation of PPP projects as a cognitive and a social undertaking in which social actors actively address the institutional and technical constraints that obstruct PPP projects.     

PPP模式立法规制及其在我国的应用研究

作为基础设施建设与运营的新型模式,PPP模式在中国的应用得到了普遍的关注,其立法问题是PPP模式真正得以推广的关键所在。本文从研究各国的相关立法规制、立法体系和法律文本等入手,对照我国实际应用PPP模式的状况,分析我国立法中存在的问题,并对相关立法模式和授权方法提出建议,以期对我国应用PPP模式提供合理的建议。     

Has the latest global financial crisis changed the way road public-private partnerships are funded? A comparison of Europe and Latin America

A financial/economic crisis may have an adverse effect on transport public-private partnerships (PPPs) as both traffic demand is negatively influenced, and governments are further under pressure. However, research on awarded road PPP contracts over a 20-year period in the European Union (EU) and Latin America and the Caribbean (LAC) showed that the market slowdown is brief and followed by a re-bounce leading to an overall upward trend. The LAC region has experienced multiple financial setbacks with no significant change in the PPP market structure as opposed to the EU, where significant changes were observed concerning a shift in the remuneration schemes employed.     

Identifying the critical success factors for relationship management in PPP projects

The longer the contract period, the higher the chance that major changes will arise. Thus a greater reliance on the established relationships is needed to maintain the contractual bond in PPP project. Relationship management (RM) can therefore be expected to be even more valuable in the PPP context. This paper aims to investigate current perceptions and experiences of RM in PPP projects and more importantly, to identify the CSFs for RM in PPP projects. By means of an empirical questionnaire survey geared towards PPP practitioners with direct hands-on experience, the opinions were solicited, analyzed and compared in relation to potential PPP RM success factors. The survey findings indicate that industry practitioners currently lack a general understanding of concepts and applications of RM, given that it is relatively new in PPP. However, they do think that RM is very important to improve the present performance of PPPs. Future PPP business opportunities can also be increased by effective RM. The top four CSFs for RM are found to be commitment of senior executives, defining the objectives, integration of the different divisions and a multidisciplinary team. However, the relative importance presently assigned for each of the above factors is insufficient, and commitment from senior management is perceived as the most difficult factor to improve.