Contract design to prevent underinvestment in Public-Private-Partnerships
Författare
Redaktör
- Akintola Akintoye
- Champika Liyanage
- Suresh Renukappa
Summary, in English
Underinvestment happens when an investor abstain from investing in an asset, even if the investment is beneficial for the customer, because it does not perceive a profitable return on the specific investment. The risk for underinvestment is high in projects which rely on high asset specificity and towards the end of contract lifespan. This paper builds upon a qualitative analysis of documentation around a multimillion dollar construction project, where contractual mechanisms are investigated to determine if they could prevent underinvestment due to high asset specificity. The study shows that underinvestment in the project is prevented by unilateral options for the public authority to buy the property at different milestones during the contractual lifespan. In addition there are joint project groups to implement a concept of partnering to reduce asymmetric information during investment decisions. In conclusion, the contract gives the impression of dealing with underinvestment. Nevertheless, there are some draw backs due to the financial setup of the public authority and it exposes the private party to some contractual risks due to high asset specificity which could risk underinvestment.
Avdelning/ar
- Construction Management
Publiceringsår
2011
Språk
Engelska
Sidor
107-118
Publikation/Tidskrift/Serie
[Host publication title missing]
Dokumenttyp
Konferensbidrag
Förlag
University of Central Lancashire
Ämne
- Construction Management
Nyckelord
- Economic analysis of law
- Procurement
- Contracting
- Public-private partnership
Conference name
CIB TG72 /ARCOM Public Private Partnerships
Conference date
2011-10-12
Conference place
Preston, United Kingdom
Status
Published
ISBN/ISSN/Övrigt
- ISBN: 9781901922813