Arbeitspapier

Ex ante construction costs in the European road sector: a comparison of public-private partnerships and traditional public procurement

Theoretical literature suggests a variety of reasons why a public-private partnership (PPP) should exhibit higher costs of construction than traditionally procured public infrastructure projects. The bundling of construction and operation contracts in a PPP give the private partner greater incentives to make investments in the construction phase to lower subsequent operation and maintenance costs. Also, the transfer of the construction risk to the private partner should be explicitly priced in a PPP. We use data on ex ante construction costs of road projects in Europe to test the existence and the magnitude of any such difference between PPPs and traditional procurement. We estimate the ex ante cost of a PPP road to be, on average, 24% more expensive than a traditionally procured road, all other things equal. This estimate corresponds by and large to reported ex post cost overruns in traditionally procured public roads. To the extent that the two measures are representative, this suggests that the largest part of the ex ante construction cost difference originates from the transfer of construction risk. This, in turn, implies that other possible sources of higher PPP construction costs, including bundling, seem to be of second-order importance in the road sector. The analysis does not allow drawing normative conclusions about the desirability of PPP as a procurement method as it focuses only on one cost component in isolation, without being able to quantify its impact on life-cycle costs and benefits.

Sprache
Englisch

Erschienen in
Series: Economic and Financial Report ; No. 2006/01

Klassifikation
Wirtschaft
Comparison of Public and Private Enterprises and Nonprofit Institutions; Privatization; Contracting Out
National Government Expenditures and Related Policies: Infrastructures; Other Public Investment and Capital Stock
Model Construction and Estimation

Ereignis
Geistige Schöpfung
(wer)
Blanc-Brude, Frédéric
Goldsmith, Hugh
Välilä, Timo
Ereignis
Veröffentlichung
(wer)
European Investment Bank (EIB)
(wo)
Luxembourg
(wann)
2006

Handle
Letzte Aktualisierung
10.03.2025, 11:42 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Blanc-Brude, Frédéric
  • Goldsmith, Hugh
  • Välilä, Timo
  • European Investment Bank (EIB)

Entstanden

  • 2006

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