Engel E., Fischer R., Galetovic A. (2011).
Public-private partnerships to revamp US infrastructure. The Hamilton Project, Discussion Paper, Volume 2, No. 8.
Public-private partnerships are often touted as a “best-of-both-worlds” alternative to public provision and privatization. But in practice, they have been dogged by contract design problems, waste, and unrealistic expectations. Governments sometimes opt for a public-private partnership, for example, because they mistakenly believe that it offers a way to finance infrastructure without adding to the public debt. In other cases, contract renegotiations have resulted in excessive costs for taxpayers or losses for private firms. This paper proposes a series of best practices that communities can undertake to ensure that public-private partnerships provide public value. These include choosing partnerships for the right reasons; relying on flexible-term Present-Value-of-Revenue (PVR) contracts; including partnerships on government balance sheets; and implementing good governance practices. Enacting these reforms will help maximize taxpayer value and reduce risks for each party involved in a public-private partnership.