Empirical Evidence for Renegotiation of PPP Contracts in the Road Sector

Abstract

Public-private partnerships (PPPs) have been used worldwide to deliver road infrastructure. The experience over the last decade has allowed academics and practitioners to assess the benefits and pitfalls of this procurement model. Among the main pitfalls, renegotiations are clearly one of the most critical issues affecting the performance of concessions. Based on the analysis of road concession contracts developed in Portugal, the writers found that the main problem behind renegotiations is intrinsically related to the performance of the public partner at several of the stages of partnership development, jeopardizing the benefits of competition brought by the public tender. The main causes of renegotiations are related to unilateral changes by the government, changes in design due to environmental reasons, delays in expropriation, and traffic below the forecast level. The results of these renegotiations range from direct compensation by the government to deep contractual changes with a completely new allocation of risks.