Risk of Public-Private Partnerships

What is it about?

Bulding on transaction cost and relational theory, the author proposes reasonable explanations for partnership risk in PPPs. Considering contextual variables, the author distinguishes between tight and loose related PPPs and presents several risk mitigation strategies.

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Why is it important?

The author concludes that risk mitigation strategies depend on the particular type of PPP. Loose related PPPs are characterized by high expertise and a higher risk of contract incompleteness by reason of opportunism. Shared ownership PPPs are characterized by lower opportunism but stronger goal ambiguities and role conflicts. This crucial distinction poses specific challenges to the development of risk management in the public sector.