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

A Comparison of Construction Contract Prices for Traditionally Procured Roads and Public–Private... 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

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

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References (28)

Publisher
Springer Journals
Copyright
Copyright © 2009 by Springer Science+Business Media, LLC.
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
DOI
10.1007/s11151-009-9224-1
Publisher site
See Article on Publisher Site

Abstract

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.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 14, 2009

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