Effects of contract governance on public private partnership (PPP) performance

Chandan Kumar

Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India

Abstract: Using the basic instruments of governance as highlighted in the transaction cost economics literature, this paper empirically examines the impact of differences in contract attributes on project outcomes. The hypothesis is to test whether better incentive structure and stricter administrative controls lead to more efficient project outcomes. It compares two sets of contracts (called as toll and annuity) from Indian PPP road projects which are designed for the same task and implemented under the similar conditions, but have some differences in the contract governance attributes. It carries out this exercise using data from more than 150 projects. The empirical findings highlight how instruments of governance influence the degree of efficiency in achieving the desired results. For instance, the annuity model, that has tighter budget constraint (i.e. better incentive structure) than the toll model, performs better in terms of minimizing cost and time overruns. Moreover, the results demonstrate that changes in administrative controls also influence outcomes. Stricter the control, better is the efficiency in the desired outcomes. The empirical findings could be useful to the policymakers for designing better contracts for the road as well as other infrastructure related sectors.

Keywords: Contracts; Transaction Cost Economics; Road sector; Public Private Partnership; India (search for similar items in EconPapers)
JEL-codes: C20 D23 K12 L33 R42 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2018-03
New Economics Papers: this item is included in nep-law, nep-ppm and nep-tre
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http://www.igidr.ac.in/pdf/publication/WP-2018-014.pdf (application/pdf)

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Working Paper: Effects of Contract Governance on Public Private Partnership (PPP) Performance (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ind:igiwpp:2018-014

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