Transparency and Renegotiation of Public-Private Partnership Contracts

• In Event: Governance and State Capacity

Abstract

Does transparency increase the chances of survival of public-private partnership contracts? Public-Private Partnerships (PPPs) are based on complex long-term contracts between actors who often have divergent interests. Their complexity requires upfront, clear, and transparent risk management. Indeed, legislative progress has been made across the globe to improve risk management in PPPs with the purpose of increasing the success of public-good provision via this form of provision. Yet, PPP projects are susceptible to being strategically used by incumbents for pork-barreling, thereby hindering the legislative efforts to strengthen PPPs as a form of provision of public goods. Using a new dataset on PPP contracts for the provision of roads in Colombia, I show that pork-barreling neutralizes the benefits of transparency in PPP contracts. The results suggest that greater transparency in risk allocation can decrease the probability of contractual modifications. However, when PPP contracts are used for pork-barreling, transparency no longer positively affects the performance of contracts and the contracts are up to seven times more likely to be renegotiated. This paper offers important contributions for the design and strengthening of models for public goods provisioning in developing contexts.

Author

• Camila Angulo Amaya, University of Wisconsin, Madison