Revisiting the Strengths and Limitations of Regulatory Contracts in Infrastructure Industries
Publication: Journal of Infrastructure Systems
Volume 16, Issue 4
Abstract
This paper evaluates regulation by contract in public-private partnerships (PPPs) in infrastructure services. Although the benefits of competition for the market and of regulatory contracts are widely acknowledged, the literature identifies several failures in their design. These “flaws” are present in both developed and developing countries and arise in all types of contracts. This study analyzes both contractual PPPs and institutionalized PPPs (mixed companies). The evidence suggests that for all kinds of contracts, the major problems tend to arise in the preparation of public tender documents: the “best” bidder is not often the winner. The likely results include redistribution in favor of the private partner, weak incentives for high performance, and renegotiation of contracts. Moreover, risks are not allocated correctly nor is effective monitoring ensured. This review of contract procedures and design allows us to draw several implications for policy makers and to present suggestions and recommendations for improving regulatory contracts.
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Information & Authors
Information
Published In
Journal of Infrastructure Systems
Volume 16 • Issue 4 • December 2010
Pages: 334 - 342
Copyright
© 2010 ASCE.
History
Received: Sep 20, 2009
Accepted: Mar 3, 2010
Published online: Apr 9, 2010
Published in print: Dec 2010
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