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A Comparison of Construction Contract Prices for Traditionally Procured Roads and Public–Private Partnerships


Theoretical literature suggests higher asset construction costs in a public-private partnership (PPP) than in traditional public procurement, due to the bundling of construction and operation and the transfer of construction risk, among other factors. Data on ex ante road construction prices in Europe suggest a PPP road to be 24% more expensive than a traditionally procured road, ceteris paribus. This estimate resembles reported ex post cost overruns in traditionally procured roads. Thus, the public sector seems to pay a premium on ex ante PPP construction contract prices mostly to cover construction risk transfer. Other reported sources of higher PPP road construction costs, including bundling, seem on average of lesser importance.

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Correspondence to Frédéric Blanc-Brude.

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A working paper version of this paper has appeared as “Ex ante construction costs in the European road sector: A comparison of public–private partnerships and traditional public procurement”, Economic and Financial Report 2006-01 of the European Investment Bank, available at Frédéric Blanc-Brude is an economist specialised in infrastructure projects and a consultant. He visited the EIB during his Ph.D. research at King’s College London.

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Blanc-Brude, F., Goldsmith, H. & Välilä, T. A Comparison of Construction Contract Prices for Traditionally Procured Roads and Public–Private Partnerships. Rev Ind Organ 35, 19–40 (2009).

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  • Public–private partnerships
  • Risk transfer
  • Construction cost
  • European roads

JEL Classification

  • L33
  • H54
  • C51