Do countries learn from experience in infrastructure PPP ? PPP practice and contract cancellation

Darwin Marcelo Gordillo, Ruth Schuyler House, Xavier Cledan Mandri-Perrott and Jordan Z. Schwartz

No 8054, Policy Research Working Paper Series from The World Bank

Abstract: Learning from experience to improve future infrastructure public-private partnerships is a focal issue for policy makers, financiers, implementers, and private sector stakeholders. An extensive body of case studies and"lessons learned"aims to improve the likelihood of success and attempts to avoid future contract failures across sectors and geographies. This paper examines whether countries do, indeed, learn from experience to improve the probability of success of public-private partnerships at the national level. The purview of the paper is not to diagnose learning across all aspects of public-private partnerships globally, but rather to focus on whether experience has an effect on the most extreme cases of public-private partnership contract failure, premature contract cancellation. The analysis utilizes mixed-effects probit regression combined with spline models to test empirically whether general public-private partnership experience has an impact on reducing the chances of contract cancellation for future projects. The results confirm what the market intuitively knows, that is, that public-private partnership experience reduces the likelihood of contract cancellation. But the results also provide a perhaps less intuitive finding: the benefits of learning are typically concentrated in the first few public-private partnership deals. Moreover, the results show that the probability of cancellation varies across sectors and suggests the relative complexity of water public-private partnerships compared with energy and transport projects. An estimated $1.5 billion per year could have been saved with interventions and support to reduce cancellations in less experienced countries (those with fewer than 23 prior public-private partnerships).

Date: 2017-05-09
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