Advertisement

Multidimensionality and Renegotiation: Evidence from Transport-Sector Public-Private-Partnership Transactions in Latin America

  • Antonio Estache
  • Jose-Luis Guasch
  • Atsushi Iimi
  • Lourdes Trujillo
Article

Abstract

Multidimensional auctions are a natural, practical solution when governments pursue more than one objective in their public-private-partnership transactions. However, multi-criteria auctions seem difficult to implement and vulnerable to corruption and opportunistic behavior of both parties involved. Using data from road and railway concessions in Latin America, the paper examines the probability of renegotiation in connection with the selected award criteria. It shows that auctioneers tend to adopt the multidimensional format when the need for social considerations, such as alleviation of unemployment, is high. But more renegotiations would likely happen when the multidimensional format is used. Good governance, particularly regulatory quality and anti-corruption policies, can mitigate the renegotiation problem.

Keywords

Corruption Governance Infrastructure development Multidimensional auctions Private sector participation 

JEL Classification

D44 H44 

References

  1. Albano G. L., Calzolari G., Dini F., Iossa E., Spagnolo G. (2006) Procurement contracting strategies. In: Dimitri N., Piga G., Spagnolo G. (eds) Handbook of procurement. Cambridge University Press, Cambridge, pp 82–120Google Scholar
  2. Alexandersson G., Hultén S. (2007) High and low bids in tenders: Strategic behaviour in public tenders of passenger railway services. Annals of Public and Cooperative Economics 78: 161–194CrossRefGoogle Scholar
  3. Andersson P., Hulten S., Valiente P. (2005) Beauty contest licensing lessons from the 3G process in Sweden. Telecommunications Policy 29: 577–593CrossRefGoogle Scholar
  4. Andres L., Guasch L., Haven T., Foster V. (2008) The impact of private sector participation in infrastructure: Rights, shadows, and the road ahead. The World Bank, Washington, DCGoogle Scholar
  5. Bajari P., Tadelis S. (2001) Incentives versus transaction costs: A theory of procurement contracts. The RAND Journal of Economics 32: 387–407CrossRefGoogle Scholar
  6. Bajari, P., Houghton, S., & Tadelis, S. (2006). Bidding for incomplete contracts: An empirical analysis. NBER Working Paper Series 12051. Cambridge, MA: National Bureau of Economic Research.Google Scholar
  7. Bajari, P., McMillan, R., & Tadelis, S. (2003). Auction versus negotiation in procurement: An empirical analysis. NBER Working Paper Series 9757. Cambridge, MA: National Bureau of Economic Research.Google Scholar
  8. Benitez D., Estache A. (2005) How concentrated are global infrastructure markets?. Review of Network Economics 31: 1617–1633Google Scholar
  9. Birdsall N., Nellis J. (2003) Winners and losers: Assessing the distributional impact of privatization. World Development 31: 1617–1633CrossRefGoogle Scholar
  10. Branco F. (1997) The design of multidimensional auctions. Rand Journal of Economics 28: 63–81CrossRefGoogle Scholar
  11. Burguet R., Che Y. K. (2004) Competitive procurement with corruption. Rand Journal of Economics 35: 50–68CrossRefGoogle Scholar
  12. Cabizza M., De Fraja G. (1998) Quality considerations in auctions for television franchises. Information Economics and Policy 10: 9–22CrossRefGoogle Scholar
  13. Che Y. K. (1993) Design competition through multidimensional auctions. Rand Journal of Economics 24: 668–680CrossRefGoogle Scholar
  14. Cripps M., Ireland N. (1994) The design of auctions and tenders with quality thresholds: The symmetric case. The Economic Journal 104: 316–326CrossRefGoogle Scholar
  15. Diaz J. J. (2006) Public sector downsizing. In: Coudouel A., Paternostro S. (eds) Analyzing the distributional impact of reforms. The World Bank, Washington, DC, pp 213–254Google Scholar
  16. Estache A., Gonzalez M., Trujillo L. (2002) What does “privatization” do for efficiency? Evidence from Argentina’s and Brazil’s railways. World Development 30: 1885–1897CrossRefGoogle Scholar
  17. Flyvbjerg, B. (2005). Policy and planning for large infrastructure projects: problems, causes, cures. Policy Research Working Paper No. 3781, The World Bank.Google Scholar
  18. Foster V., Tiongson E., Laderchi C.R. (2005) Utility reforms. In: Coudouel A., Paternostro S. (eds) Analyzing the distributional impact of reforms: A practitioner’s guide to trade, monetary and exchange rate policy, utility Provision, agricultural market, land policy, and education. The World Bank, Washington, DC, pp 73–143Google Scholar
  19. Foster, V. (2005). Ten years of water service reforms in Latin America: Toward an Anglo-French model. Water Supply and Sanitation Sector Board Discussion Paper Series No. 3. The World Bank.Google Scholar
  20. Gassner, K., Popov, A., & Pushak, N. (2009). Does private sector participation improve performance in electricity and water distribution? Trends and Policy Options No. 4. The World Bank.Google Scholar
  21. Guasch L. (2004) Granting and renegotiating infrastructure concessions: Doing it right. The World Bank, Washington, DCCrossRefGoogle Scholar
  22. Guasch L., Laffont J. J., Straub S. (2007) Concessions of infrastructure in Latin America: Government-led renegotiation. Journal of Applied Econometrics 22: 1267–1294CrossRefGoogle Scholar
  23. Guasch L., Laffont J. J., Straub S. (2008) Renegotiation of concession contracts in Latin America: Evidence from the water and transport sectors. International Journal of Industrial Organization 26: 421–442CrossRefGoogle Scholar
  24. Kagel J., Levin D. (1986) The winner’s curse and public information in common value auctions. The American Economic Review 76: 894–920Google Scholar
  25. Kain, P. (2007). The pitfalls in competitive trending: Addressing the risks revealed by experience in Australia and Britain. In European Conference of Ministries of Transport (Eds.), Competitive tendering of rail services (pp. 43–126). Paris: OECD Publishing.Google Scholar
  26. Kerf, M. (1998). Concessions for infrastructure: A guide to their design and award. World Bank Technical Paper No. WTP 399. The World Bank.Google Scholar
  27. Kessides I. (2004) Reforming infrastructure: Privatization, regulation, and competition. The World Bank, Washington, DCGoogle Scholar
  28. Klein, M. (1998). Bidding for concessions. Policy Research Working Paper Series No. 1957. The World Bank.Google Scholar
  29. Krishna V. (2002) Auction theory. Academic Press, New YorkGoogle Scholar
  30. Lalive R., Schmutzler A. (2008) Exploring the effects of competition for railway markets. International Journal of Industrial Organization 26: 443–458CrossRefGoogle Scholar
  31. Maddala G. S. (1983) Limited-dependent and qualitative variables in econometrics. Cambridge University Press, CambridgeGoogle Scholar
  32. NAO. (2001). Managing the relationship to secure a successful partnership in PFI projects, National Audit Office, from http://www.nao.org.uk/publications/0102/managing_the_pfi_projects.aspx?alreadysearchfor=yes.
  33. Nash, C., & Smith, A. (2007). Passenger rail franchising: British experience. In European Conference of Ministries of Transport (Eds.), Competitive tendering of rail services (pp. 7–43). Paris: OECD Publishing.Google Scholar
  34. Nicoletti, C., & Peracchi, F. (2001). Two-step estimation of binary response models with sample selection. from http://www.iser.essex.ac.uk/files/conferences/bhps/2001/docs/pdf/papers/nicoletti.pdf.
  35. Shaw, N., Gwilliam, K., & Thompson, L. (1996). Concession in transport. TWU Discussion Papers TWU-27. The World Bank.Google Scholar
  36. Toet, A. (2007). Central and Eastern Europe: A special situation. In European Conference of Ministries of Transport (Eds.), Competitive tendering of rail services (pp. 189–194). Paris: OECD Publishing.Google Scholar
  37. Torta F. (2005) The concession through a bid: the new Brescia-Milan highway: a case study. In: Ragazzi G., Rothengatter W. (eds) Procurement and financing of motorways in Europe. Elsevier, New York, pp 135–143Google Scholar
  38. Ware G., Moss S., Campos E., Noone G. (2007) Corruption in public procurement: a perennial challenge. In: Campos E., Pradhan S. (eds) The many faces of corruption: Tracking vulnerabilities at the sector level. The World Bank, Washington, DC, pp 295–334Google Scholar
  39. Wooldridge J. (2002) Econometric analysis of cross section and panel data. MIT Press, MassachusettsGoogle Scholar
  40. (2006) Infrastructure in Europe and central Asia region approaches to sustainable services. Washington, DC. The World BankGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC. 2009

Authors and Affiliations

  • Antonio Estache
    • 1
  • Jose-Luis Guasch
    • 2
  • Atsushi Iimi
    • 3
  • Lourdes Trujillo
    • 4
  1. 1.Université Libre de Bruxelles, European Centre for Advanced Research in Economics and StatisticsBruxellesBelgium
  2. 2.The World Bank (LCSSD)NW WashingtonUSA
  3. 3.The World Bank (FEU)NW WashingtonUSA
  4. 4.Faculdad de Ciencias Economicas y EmpresarialesUniversidad de las Palmas de Gran Canaria, Tafira Las Palmas de Gran CanariaLas PalmasSpain

Personalised recommendations