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Public Private Partnerships for Transport Infrastructure: Renegotiations, how to approach them and economic outcomes Roundtable

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PPP for Transport Infrastructure: Renegotiations - Chairman's Conclusions

Summary and Conclusions

Public Private Partnerships for Transport Infrastructure: Renegotiation and Economic Outcomes

Roundtable Report, 24 February 2017

PPP Renogiations cover image

Public-private partnerships (PPPs) are an important vehicle for private participation in infrastructure investment, delivery and management. Renegotiations are an integral part of the PPP process but their prevalence varies markedly in different parts of the world. Renegotiations can be usefully employed to adjust the PPP contract to unforeseeable events, beyond the control of contractual parties. There is also a danger, however, that they will be used to change the initial balance of costs and benefits in the contract.

This report provides an overview of the nature of PPP renegotiations in different regions of the world and at different times to help understand when PPP contract renegotiations are desirable and when they are not. In general it is concluded that when contracts are set up well, renegotiations should be few and far between.

Roundtable Report 161

PPPs are complex financing structures involving substantial transaction costs, with the legal documentation alone often consisting of several hundred pages. Despite the care taken in preparing PPPs, renegotiation is a common occurrence and can have an impact on value for money. It is not clear, however, whether this reflects the impossibility of any contract to foresee every eventuality or is usually the result of more mundane explanations. 

The Roundtable will aim to review the outcomes and risks most often associated with renegotiation in practice, the alternatives available for addressing uncertainty and incompleteness in contracts, elements for maximizing the chances of renegotiation delivering net welfare benefits and the economic welfare impacts where termination and bankruptcy is preferred to renegotiation.