Risk allocation and the costs and benefits of public--private partnerships (original) (raw)

Bundling in public-private partnership projects -a conceptual framework

Purpose-The performance of public-private partnership (PPP) projects depends on how the project has been structured. The traditional PPP option analysis for structuring project scope and size relating to the bundling of functions concerning a single component of the value chain will need to be extended to handle multi-component sectors such as municipal solid waste (MSW) in formulating the project scope. This analysis is currently missing in the extant literature. The paper aims to discuss these issues. Design/methodology/approach-Through a comprehensive literature review as the methodological backbone, this study develops a testable holistic framework for the procurement of MSW PPP projects that examines how various factors of bundling affect the performance of the PPP projects. Findings-Using transaction cost economics, agency and auction theories, the review identifies that innovation, maturity, quality specifiability, scope, competition, information asymmetries and transaction attributes have a significant influence on the performance and success of the PPP projects. Research limitations/implications-Alternative supply chain management possibilities and firm-level organisational ways can be predicted using this framework to strategize the solutions for the municipal infrastructure. Based on this contribution, future research can test the framework to increase the knowledge of bundling theory about how to structure network infrastructure PPP projects. Originality/value-Studies on how to bundle/unbundle the projects having components of the value chain are in a nascent stage. The present study attempts to extend the body of knowledge on PPP to the complexity of bundling both the functions and components of the value chain in structuring the PPP project scope.

Public-Private Partnerships and Task Interdependence Revisited

2012

This paper is concerned with the issue of contract bundling when a public project involves both a building stage and an operation stage. In a widely cited paper, Bennett and Iossa (2006) show that positive externality between the investments in the

RISK GOVERNANCE IN PUBLIC PRIVATE PARTNERSHIPS

Public Private Partnerships (PPPs) involve an alternative service delivery (ASD) mechanism, based on government outsourcing between a public and a private entity, regulated by Treasury Regulation 16 of the Public Finance Management Act (PFMA). PPPs are based on a value-for-money principle, with the objective of providing functional, efficient and cost-effective services, primarily associated with infrastructure delivery projects. PPPs utilise private sector capacities, in conjunction with providing a mechanism for substantial risk transfer to the private sector. Risk transfer and sharing in PPPs is an integral higher order management function, instituted to hedge against unforeseen losses, uncertainties and vulnerabilities. This denotes and accentuates that risk management in PPPs should encourage and enhance best practice, along with improved risk governance, in order to strengthen the resilience of the complex contractual arrangements involved, increasing strategic control and decreasing loss exposure. Consequently, this article provides an overview of current risk management and good governance barriers in PPPs, in an effort to strengthen the relationship between best practice and risk management, thereby increasing the performance of long-term PPP contracts. The article provides an assessment of case studies, relative to infrastructure, to identify risk governance gaps in PPPs. A mixed methods approach is applied in order to triangulate the findings derived from infrastructure development case studies, multiple expert in-depth interviews and self-administered surveys.

The Unaccounted Risks of Public Private Partnerships

This brief article examines the ramifications of adoption of the public-private partnership (PPP) mechanism in the urban infrastructure and service sector. I focus on the debate concerning the efficacy and equity of PPPs and, particularly, the issue of risk. I first provide a definition of public-private partnerships and discuss how the literature concerning them has approached risk. I highlight the fact that public-private partnership proponents and critics alike are concerned with this question, albeit in very different ways. The mainstream management literature sets up a comprehensive list of risks associated with these structures so that these may be delimited for each project and addressed as efficiently as feasible to avoid cost increases. The political and economic literature focusing on such partnerships meanwhile, approaches the question of risk more broadly. These analysts outline the challenges that attend the PPP mechanism in comparison to other development alternatives, such as traditional procurement, and to traditional public sector provision of public goods and services. Of particular concern to scholars in this literature are the effects of public-private partnerships on popular participation in decision-making, on power sharing among groups and on the distribution of wealth. These investigators contend that, unchecked, these risks challenge the very premise that PPPs can more efficiently address a widening infrastructure gap. These concerns also work against regulatory frameworks founded on the principle that greater public participation and control in public decision-making can better address geographic service-related disparity and income inequality.

Delivering integrated solutions in the public sector: The unbundling paradox

Industrial Marketing Management, 2012

"The paper analyzes changes in suppliers’ organizational structures to deliver integrated solutions by examining the bundling across different project phases with a focus on realizing risk transfer and through-life innovation. A multiple, longitudinal case study method is used to examine changes in integrated solution provision in Public Private Partnerships over a 15-year period. The study deploys rich data sets by combining 108 government reports with 38 interviews. Findings examine organizational transformation and suggest that as a response to the need to be competitive the solutions provider ‘unbundles’ the bundle of integrated solutions by creating sub-units to handle distinct phases. The paper questions whether bundling the different management and procurement phases of a major project into one contract is appropriate. Managers must weigh the transactional cost savings of dealing with a prime contractor against not only the transactional costs of dealing with distinct contractors for individual phases, but also the comparative ability of the two options to deliver. KEYWORDS: Bundling, Integrated solutions, Customized solutions, Organizational transformation, Buyer- supplier relationship, Longitudinal case studies"