PPP performance evaluation: the social welfare goal, principal–agent theory and political economy

Mark A. Moore () and Aidan Vining
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Mark A. Moore: Simon Fraser University

Policy Sciences, 2023, vol. 56, issue 2, No 4, 267-299

Abstract: Abstract Governments use public–private partnerships (PPPs) as their agents to finance, design, build, maintain and operate their public infrastructure. Despite wide use, many PPPs have produced poor outcomes, including large transaction costs, renegotiations and bankruptcies. Society delegates the authority to build and operate public infrastructure to governments, which must then choose the means of provision. The alternatives are either government-financed design-build contracting, followed by government operation and maintenance—traditional procurement (TP)—or a PPP. We examine this choice using principal–agent and political economy theories. We evaluate the performance of PPPs versus TP against the normative goal of social welfare (economic efficiency). As well, in a review of the empirical literature through 2022, we find no convincing evidence that PPPs provide superior social welfare, nor evidence that many projects been evaluated on this basis. Governments’ continued preference for PPPs in many cases is best explained by political goals and political economy theory. A review of recent empirical evidence supports the view that political economy variables contribute to PPP adoption.

Keywords: Public–private partnerships; Principal-agent theory; Infrastructure procurement; Social welfare; Technical efficiency (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11077-023-09504-7

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