Renegotiation of public private partnership road contracts: Issues and outcomes

Abstract

The renegotiation of road projects has been an important issue that has generated concerns in PPP procurement over the last decade. This has had serious policy implications for public procurement policy across countries because of its implications for the achievement of the objectives defined at the inception of PPP road contracts. This paper assesses the renegotiation of Public-Private Partnership (PPP) infrastructure projects in order to identify the issues involved in renegotiation and its outcomes. Data were collected through a literature review of selected studies on PPP infrastructure projects on a sectoral basis with particular emphasis on Latin America, Portugal and Spain. It was revealed that a high proportion of PPP contracts in the transport sector are renegotiated: Indeed, in the transport sector, more PPP road projects are renegotiated than other forms of transport projects. The main factors surrounding the renegotiation of road contracts are: lack of an adequate contract design, frequent opportunistic behaviour on the part of both public and private partners during the implementation of PPP road projects, changes in the conditions affecting revenue and costs beyond the reasonable assumptions accounted for in the original contract, corruption, and political and economic instability, all of which in most instances reduce the chance of the public partner achieving its objective of value for money (VfM). The paper concludes with a discussion of the need to develop a framework for integrating considerations of value for money into the renegotiation process of PPP road contracts.