PUBLIC PROCUREMENT MECHANISMS FOR PUBLIC-PRIVATE PARTNERSHIPS

Why do some countries (often developing and emerging economies) adopt special laws on PPP, whilst in others PPPs are governed by the legislation on public procurement and related bylaws? This paper explains the above global discrepancies from an institutional perspective. In a contract-theoretical framework we demonstrate how PPPs can enable projects that are not feasible through standard public procurement arrangements. Incentives for private partners are created through extra benefits (often non-contractible) from their collaboration with the government (e.g. risk reduction, reputational gains, access to additional resources, lower bureaucratic burden, etc.). In a well-developed institutional environment these benefits are implicitly guaranteed, suggesting no need in a specialized PPP-enabling legislation. Otherwise, a PPP law should establish an institutional architecture to provide the above benefits.