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Abstract(s)
As more countries are relying on the private sector for provision of public services,
Public-Private Partnerships (PPPs) are at the center of this growing trend. Optimal risk
allocation through risk transfer to the private sector is the critical issue for the success of
these partnerships in achieving best value-for-money (VfM) for the public sector. Using
the Portuguese shadow toll concessions (SCUT), this study aims to analyze and evaluate
their allocation of risk between the public and private sectors. Accordingly, the first part
of the paper examines how risks in the SCUT concessions were allocated. Our analysis
indicates that for the most part, with the exception of demand risk, risks were well
allocated. The second part of the paper identifies and evaluates the main risks transferred
to the private sector. It also goes further in assessing gains before and after risk transfer,
if any, to the private sector. We find that risks transferred to the private sector account for
a very small share of public sector payments. This paper also concludes that the costs to
the public sector, through the payment obligations, far outweigh those assumed by the
private sector. Consequently, this paper examines whether the SCUT concessions were
successful in regards to achieving VfM. The high gains to the private sector may suggest
otherwise. However, given that there was no comparison of VfM between the PPP
approach and an alternative procurement route, it is not possible to draw any concrete conclusions.
Description
Keywords
Risk allocation Risk valuation Value for Money NPV-at-risk