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Public–private partnerships vs. traditional contracts for highways

Comparison of cost and quality of roads
  • Ram SinghEmail author
Article
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Abstract

During the last 2 decades, several countries have used Public–Private Partnerships (PPPs or P3) along with the traditional contracts for development of infrastructure. In this paper, we model the incentive structures induced by PPPs contracts and the traditional procurement contracts used for infrastructure. The model is used to predict outcomes under PPP contracts versus the traditional contracts. Predictions emanating from the model are tested using a data set of 313 national highway projects in India. The empirical analysis examines validity of a widely held belief that PPPs are better than the traditional contracts in terms of the cost and quality of infrastructure. We show that the construction costs are significantly higher for PPPs than the traditionally procured (non-PPP) highways. Besides, we compare the quality of PPPs with the non-PPP roads. Our analysis shows that the PPPs encourage life-cycle approach towards project costs. This effect is more pronounced for Toll-PPPs than for Non-toll-PPPs. Moreover, the quality of PPP roads is better than the traditional highways.

Keywords

PPP P3 Procurement contracts Toll Roads Life-cycle costs Cost overruns International Roughness Index (IRI) Quality 

JEL classification

D86 H54 L92 R42 

Notes

Acknowledgements

I am thankful to the referee for helpful suggestions. During the course of this study, I have benefited from my interactions on the subject with Kaushik Basu, Sugato Dasgupta, Lenorado Felli, Andrew Foster, Oliver Hart, Neha Jain, Rajat Kathuria, Stefan Klonner, Stefan Voigt, J. V. Meenakshi and the research team of the International Growth Centre (IGC). The funding support by the IGC and the University of Delhi are gratefully acknowledged. The Centre for Development Economics, Delhi School of Economics, provided institutional support. I am grateful to Mr. Lars Forslöf, the developer of the Roadroid App, who kindly agreed to provide free access to the app for the purpose of data collection on the quality of roads and its analysis. I thank Kriti Jain and Nikita Gupta for providing excellent research assistance.

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Copyright information

© Editorial Office, Indian Economic Review 2019

Authors and Affiliations

  1. 1.Department of Economics, Delhi School of EconomicsUniversity of DelhiDelhiIndia

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