The challenge of using standard contracts in public–private partnerships

A call for an increased use of standard contracts in public–private partnerships (PPPs) for infrastructure development is noticeable in practice. These contracts are expected to simplify and improve procurement by creating opportunities for learning, lower transaction costs, and better competition. This paper delineates standard contracts in PPP as a new venue for research and unfolds their potential impact. Here lies an important challenge since the benefits of standardization are not as straightforward as they look at first sight, particularly when taking into account the tension between the powerful, control-oriented role of contracting authorities and the need for contingent, informal contracting.     

Balancing the additional costs of purchasing and the vendor set dimension to reduce public procurement costs

The paper addresses the reduction of the total cost of purchasing in public procurement, focusing on tenders called for in the European Union and awarded by the Lowest Price (LP) criterion. Taking into account the main characteristic features of governmental purchasing (competition, prescribed procedures, and transparency) and building upon the related contributions in the literature, we present a probabilistic approach for evaluating and limiting the total cost of purchasing in public tenders awarded according to the LP criterion. The presented framework includes the evaluation of the so-called additional costs of purchasing (ACP), a part of the transaction cost that is typically considered in the related literature from a private organization perspective only. The approach can be applied to a generic transaction in any public tender issued according to the European legislation with the LP criterion. Considering the real case study of the public tender for maintenance works on a municipal sport facility in Bari (Italy), we take into account the costs of both transaction counterparts, i.e., the ACP regarding the contracting authority and those related to the firms involved in the tender. Applying the model to the case study, we underline the relevance of ACP for public tenders and show that, by inviting a suitable number of bidders to participate in the call, it is possible to save money both for the contracting authority and the involved competitors.     

Rising costs, falling budgets and their implications for defence policy

The real unit costs of defence equipment have been rising persistently since World War II, much faster than national defence budgets. Most nations have adapted by buying fewer units in successive generations of each class of defence equipment, and ultimately by omitting some classes from their armed forces. However current decreases in defence budgets will soon force most NATO nations (including the UK) to adopt more closely coordinated policies for force planning and equipment procurement, in order to maintain NATO's military capabilities.     

装备采办效益优化研究:一个交易费用理论视角

交易费用理论指出,交易成本是制度的运行成本,其大小取决于交易形式与其制度的匹配程度,两者越匹配则其交易成本越小。从交易费用理论入手,通过分析装备采办成本的构成及决定因素,指出装备采办效益优化的关键在于选择和建立合理的制度以尽可能地降低采办的交易成本,即制度因素是我国装备采办低效的症结。在此思路下,探究了我国装备采办制度的不合理之处,并提出相应的政策建议。     

Public–private partnership—Development of long-term relationships in public procurement in Germany

Hybrid partnerships are well established in the private sector combining market efficiency with the possibility of hierarchical steering mechanisms. By implementing Public–Private Partnerships (PPPs), public authorities seek to benefit from cooperation with specialised suppliers. However, many complex factors, including legal regulations, have to be considered in relation to outsourcing activities in the public sector. The decision on public–private cooperation is not driven only by economic principles. This paper deals with the economic and legal decision process of PPPs. The theoretical and legal framework is then applied and illustrated through a case study of the German Aerospace Center (Deutsches Zentrum für Luft- und Raumfahrt e.V./DLR).     

The impact of innovation training on successful outcomes in public–private partnerships

Public–private partnerships (PPPs) are increasingly seen as a way of innovating the production and management of public services. However, the question of what drives innovation in partnerships has so far received only limited attention. Drawing on network governance and collaborative innovation literature, this article presents the findings from a survey among 260 Danish PPPs. The study shows that while innovation training has a significant effect on achieving innovation in PPPs, factors such as trust and institutional support only affect some innovation types. The findings demonstrate the importance of individual innovation skills and a differentiated understanding of innovation outcomes in PPPs.     

Rethinking the role of private capital in infrastructure PPPs: the experience of Ontario,Canada

Private capital has become a significant feature of infrastructure public–private partnerships (PPPs) on the premise that it incentivizes diligent risk management among private partners. This paper evaluates this claim by examining the PPP programme in Ontario, Canada, where the amount of long-term private capital in PPPs has been reduced. The paper shows that decreasing the amount of private capital after construction does not undermine performance, while producing cost savings for governments. This was achieved by deploying sophisticated procurement and monitoring strategies. These findings suggest that private capital is one of several tools available to achieve positive value for money in PPPs.     

Sector choices for public service delivery The transaction cost implications of executive turnover

The question of whether private firms should contract out for products and services or provide them internally (i.e. become more vertically integrated) has been a topic that has concerned scholars for many years. This article argues that the transaction costs in local contracting choices are linked to the characteristics of political systems that influence political and administrative uncertainty. Our analysis examines the transaction costs that result from executive turnover. Specifically, we are concerned with how uncertainty resulting from turnover in leadership positions in city government affects the ability of a municipality to negotiate contracts, make credible commitments to suppliers and faithfully uphold and enforce contracts once they are in force. We find that manager turnover reduces the likelihood of contracting with private sector providers. Mayor turnover has the opposite effect increasing contracting with both government and for-profit providers.     

Public–private partnerships: lessons from the British approach

British governments have for many years sought to move activities from the public to the private sector. For the past decade, this has included the provision of public services not only operated but also financed by the private sector. In 2000, these private finance initiative (PFI) projects were incorporated into a wider programme of public–private partnerships (PPPs). Compared to conventionally financed procurement, the PFI approach has brought both benefits and costs. The balance of advantage is often unclear, and at the strategic level the main drivers appear still to be ideology and accounting. However in its practical application many useful lessons have been drawn and applied.     

Public–private partnership in Public Administration discipline: a literature review

Public–private partnerships (PPPs) have become popular tools to deliver infrastructure and public services around the world. As an innovative public procurement approach, PPPs have drawn considerable attention from academic circles. In order to enhance our knowledge of PPPs, the authors conducted a systematic literature review of articles published in international journals of the Public Administration (PA) discipline. Four main topics in this discipline are identified by means of social network analysis, including PPP concept, risk sharing amongst PPP participants, the drivers of PPP adoption, and PPP performance. Seven propositions about the four topics are summarized. Directions for future research are also considered.     

Why a Multinational Firm Chooses Expatriates: Integrating Resource‐Based,Agency and Transaction Costs Perspectives*

abstract This paper develops an integrative organizational economics framework explaining and predicting multinational firms' managerial resource deployments based on resource‐based, agency, and transaction costs theories. Our empirical findings suggest that the governance decision for managerial services of multinational firms is influenced not only by the comparative capabilities of managers, but also by the economic costs to the firm of influencing the behaviours of managers through managerial contracting.     

Public–Private Partnerships and the Design Process: Consequences for Architects and City Building

Governments are increasingly using public–private partnerships (PPPs) to deliver public infrastructures and facilities. The prime motivation to embark on these partnerships is often to deliver products and services on time and on budget. It is generally assumed that by transferring project risks and responsibilities to private‐sector actors, governments can achieve better value for money. This article provides a novel perspective on the standards applied in PPP endeavors as it examines the tensions between the public management rationale behind value for money on the one hand, and conceptions of design and city building on the other. We focus on planning practice in the Canadian province of Ontario to show that governments apply different understandings of value in PPPs which, in turn, affect the way the design process is run. Architects, who are used to playing the role of master builder in a traditional public infrastructure project, are shifted into a less influential position and struggle with their new role. Furthermore, a different set of priorities applies in the new procurement process. The increasing use of PPPs can thus have significant consequences for city building.     

What makes public-private partnerships work? Survey research into the outcomes and the quality of cooperation in PPPs

Public–private partnerships (PPPs) are often regarded as the solution for time and budget overruns in large infrastructural projects, but not all are successful. This raises the question of what really makes PPPs work. Focusing on the role of relational aspects, this article examines the degree to which trust and managerial activities correlate to the perceived performance and cooperation process in PPP projects. A multilevel analysis of survey data from 144 respondents involved in Dutch PPP projects shows that both trust and management correlate significantly to the perceived performance of these projects. Moreover, trust is associated with a good cooperation process.     

Revisiting agency and transaction costs theory predictions on vertical financial ownership and contracting: electronic integration as an organizational form choice

This paper provides an organizational economics foundation to guide managers in matching the comparatively more efficient organizational mode with transactional characteristics such as: (1) the degree of (human capital) asset specificity involved in the transaction, (2) the degree of uncertainty surrounding the transaction, and (3) the number of trading partners (suppliers and buyers) in the vertical supply chain. The key role of technology, and more specifically the e‐business infrastructure and its effects on organizational mode choice, is highlighted. The main results from this analysis suggest that changes in information technology are changing the nature of transaction costs leading to more efficient management through an electronic integration solution thus favoring contracting and outsourcing than would have been technologically possible when Williamson's Markets and Hierarchies (Markets and Hierarchies: Analysis and Antitrust Implications. Free Press: New York, 1975) was published. It is emphasized that the transaction cost economics principles are durable but that the breathless advances in information technology, especially in the past decade, have comparatively favored lower transaction costs of markets over hierarchies. Copyright © 2006 John Wiley & Sons, Ltd.     

Situational Contracting as a Mode of Governance

Abstract

This article introduces the option to make individual access to excludable public benefits conditional on ascertainable efforts to limit claims. Contracts are situational when front-line staff are mandated to allow for differences in the ability to perform of their counterparts and to offer customized enabling facilities to improve capabilities. Degrees of freedom and transaction costs are controlled through political guidance in protocols, on the basis of apply-or-explain. Situational contracting reveals individual preference, reduces opportunism, furthers trust and induces open innovation. The article presents results of an early application in The Netherlands.     

Japanese Interfirm Networks: Exploring the Seminal Sources of their Success

An extensive body of literature explains features of the highly co-operative relationship between Japanese firms, particularly Toyota, and their supplier-firm network. The literature does not explore when these networks emerged or the factors conducive to their emergence. This paper uses transaction cost analysis and game theory to address these issues. It indicates that the networks emerged in the 1950s, and that the initiating factors were exogenous to the networks, centring on the unusual business environment that then prevailed in Japan. The analysis indicates why firms like Toyota gained an advantage over competitors in America. They were relieved of two major transaction costs: those linked to internalization and decomposed subcontracting. In addition, successful networks developed intragroup understandings that led to significant reductions in both interfirm co-ordination costs and direct production costs per unit of output. The paper questions the extent to which Toyota-type networks are prevalent in Japan. It questions the advantage that firms in America or elsewhere (even Japan) can gain from emulating Toyota practices such as unguarded subcontracting. It offers a different interpretation to standard business practices in firms like Toyota, such as relational contracting. It provides a basis for a reinterpretation of Japanese business history and the role of ‘Japan Inc.’.     

Do Private Prisons Really offer Savings Compared with their Public Counterparts?

Private contracting of public services has been alleged to reduce costs. We address the critical question of whether private contracting really saves money, using the US prison privatisation experience as an example. Although the consensus in the literature identifies such savings, we raise economic issues of incomplete contracting, asymmetric information and moral hazard, which complicate matters. We discuss explicit, implicit, and agency costs that show that measuring the savings and quality impact of private contracting is more challenging than the literature suggests, and often inconclusive. This may suggest caution in designing solutions to cost pressures.     

Impact of e-procurement: Experiences from implementation in the UK public sector

The advent of the Internet as a business systems platform has been a catalyst for major changes in the operation and status of organizational procurement. Early e-procurement literature forecast significant improvements in procurement costs, an improving status of the purchasing function, and changes to the structure of supply markets. Our study seeks to evaluate the validity of these forecasts through the development of a structural model of the ‘e-procurement effect’. This model is intended to define the dynamics of the e-procurement process in an organization and provide a foundation for a research stream into the transformational effect of e-procurement deployment.

The article presents the evaluation of e-procurement implementation and operation from an 18-month study of e-procurement deployment across nine UK public sector organizations. The article explores five key themes in e-procurement, namely system specification, implementation management, changes to organizational characteristics, changes in total acquisition costs, and changes to governance structures.

Our analysis suggests that the proposed structural model of the e-procurement effect is broadly applicable and that many of the previous claimed benefits in the literature can be realized. We also contend that an important variable for the success of e-procurement adoption is to address the internal service quality attributes of e-procurement processes—a topic which offers significant scope for future research.     

青藏铁路运输成本对物流交易效率的影响分析

运用新兴古典经济学交易效率分析框架,构建了基于运输成本的物流交易效率模型,以青藏铁路为例,对运输成本对物流交易效率的有效促进作用进行了实证分析,认为运输成本是制约青藏地区物流交易效率提高的重要内生变量。青藏铁路是一条公益性突出的线路,它显著提升了青藏两省区的物流水平。因此,有必要制订青藏铁路运营支持政策,建立运输成本补偿机制,促进青藏两省区物流交易效率的不断提高。     

新制度经济学视角下会计发展:动因与启示

本文从新制度经济学的视角,从制度、产权和交易费用等角度对会计和会计理论发展史进行分析,认为制度是推动会计和会计理论不断发展的重要动力;经济发展水平决定会计发展水平;产权、交易费用与会计之间内在逻辑的一致性诞生了产权会计学派,公允价值计量是产权会计学派的历史选择。