Value for Money and Risk in Public–Private Partnerships

TLDR

Value for money is the primary justification for PPPs, yet it is uncertain whether pre‑project assessments adequately consider planning constraints such as limited community consultation, contractual lock‑ins, and political preferences. The study examined 28 Ontario infrastructure PPPs and interviewed 18 senior stakeholders, proposing strategies such as unbundling construction and operation phases, using competitive dialogue tendering, and incorporating contract rebalancing terms to better share risks. The analysis shows that transferring construction risks to private partners drives value‑for‑money outcomes, potentially overestimating the transfer of planning risks, and recommends that PPP contracts allow greater transparency and preserve government flexibility over key planning tasks. Research was funded by a Standard Research Grant from the Social Sciences and Humanities Research Council of Canada (Application Number: 110998).

Abstract

Problem, research strategy, and findings: Delivering improved public services at lower cost, also known formally as value for money (VfM), is often the main rationale for procuring large infrastructure projects through public–private partnerships (PPPs). However, it is unclear whether the ex ante assessments of PPPs account for key planning concerns, including limitations on community consultation, contractual lock-ins that curtail public flexibility to make future plans, and a political preference for PPPs that may influence the way that projects are structured and evaluated. This set of questions is examined for 28 infrastructure PPPs delivered in Ontario, Canada, and interviews with18 senior political, government, and private-sector participants in the province's PPP industry. We find that transferring of construction risks from government to the private-sector partners drives VfM results, and may overvalue the extent to which planning related risks can be transferred. Takeaway for practice: PPP contract structures should permit more transparency during the project planning process and preserve the flexibility of governments to control key planning tasks such as user fees, service coordination and facility expansion. Strategies might include: the unbundling of construction and operation phases of the PPP in all but the most unique situations, the use of competitive dialogue tendering to deepen public–private collaboration earlier in the planning process, and the inclusion of contract rebalancing terms to better share rather than transfer project risks. Research support: This research was funded through a Standard Research Grant from the Social Sciences and Humanities Research Council of Canada (Application Number: 110998).