Procurement in Infrastructure : What Does Theory Tell Us?

Infrastructure has particular challenges in public procurement, because it is highly complex and customized and often requires economic, political and social considerations from a long time horizon. To deliver public infrastructure services to citizens or taxpayers, there are a series of decisions that governments have to make. The paper provides a minimum package of important economic theories that could guide governments to wise decision-making at each stage. Theory suggests that in general it would be a good option to contract out infrastructure to the private sector under high-powered incentive mechanisms, such as fixed-price contracts. However, this holds under certain conditions. Theory also shows that ownership should be aligned with the ultimate responsibility for or objective of infrastructure provision. Public and private ownership have different advantages and can deal with different problems. It is also shown that it would be a better option to integrate more than one public task (for example, investment and operation) into the same ownership, whether public or private, if they exhibit positive externalities.

Bibliographic Details

Main Authors:	Estache, Antonio, Iimi, Atsushi, Ruzzier, Christian
Language:	English
Published:	2009-07-01
Subjects:	ADVERSE SELECTION, ASSET OWNERSHIP, ASYMMETRIC INFORMATION, AUCTION, AUCTION DESIGN, AUCTIONS, BENEFICIARIES, BID, BID PRICE, BIDDING PROCESS, BIDS, BULK CARGO, CAPITAL INVESTMENT, CARRIERS, COMMERCIAL INVESTMENTS, COMPETITION AMONG PORTS, COMPETITIVE BIDDING, CONCESSION, CONCESSION AGREEMENTS, CONCESSION CONTRACTS, CONCESSIONAIRES, CONFLICT OF INTEREST, CONFLICTS OF INTEREST, CONTRACT ADJUSTMENT, CONTRACT ADMINISTRATION, CONTRACT AWARD, CONTRACT CLAUSES, CONTRACT LEASE CONCESSION, CONTRACT RENEWAL, CONTRACT THEORY, CONTRACTOR, CONTRACTORS, CONTRACTUAL ARRANGEMENTS, CONTRACTUAL RELATIONSHIP, COORDINATION FAILURE, COST-REIMBURSEMENT, CUSTOMER SATISFACTION, DEBTS, DEREGULATION, DEVELOPING COUNTRIES, DEVELOPMENT BANK, DISTRIBUTION COMPANIES, DISTRIBUTION FUNCTIONS, DISTRIBUTION NETWORK, DIVESTITURE, ECONOMIC COSTS, ECONOMIC EFFICIENCY, EFFICIENT ALLOCATION, EFFICIENT OUTCOME, ELECTRICITY, ELECTRICITY DISTRIBUTION, ELECTRICITY SECTOR, ELECTRICITY SECTOR REFORM, ENERGY MANAGEMENT, ENERGY SALES, FEDERAL PROCUREMENT, FINANCIAL PERFORMANCE, FINANCIAL STRUCTURE, FISCAL DISCIPLINE, FRAUD, FREIGHT, FREIGHT OPERATIONS, GENERATION, GOVERNMENT OWNERSHIP, GOVERNMENT SUBSIDY, HIDDEN ACTION, HIDDEN ACTION PROBLEM, HOURS OF SERVICE, INCENTIVE MECHANISMS, INCENTIVE PAYMENTS, INCOMPLETE CONTRACT, INCOMPLETE CONTRACTS, INFRASTRUCTURE CONCESSIONS, INFRASTRUCTURE DEVELOPMENT, INFRASTRUCTURE DEVELOPMENT PROJECTS, INFRASTRUCTURE PROJECTS, INFRASTRUCTURE PROVISION, INFRASTRUCTURE SECTOR, INFRASTRUCTURE SERVICES, INITIAL CONTRACT, INSTRUMENT, INTERNATIONAL BANK, INTERNATIONAL STANDARDS, INVESTING, INVESTMENT REQUIREMENT, INVESTMENT REQUIREMENTS, JOINT VENTURE, JOINT VENTURES, LACK OF COMPETITION, LACK OF TRANSPARENCY, LEASE, LEASE CONTRACT, LEASE CONTRACTS, LEASES, LEVEL OF COMPETITION, LICENSES, LICENSING, LONG-TERM COMMITMENT, MACROECONOMIC RISKS, MANDATE, MARKET RISK, MONETARY FUND, MORAL HAZARD, NEGATIVE EXTERNALITIES, OPTIMAL CONTRACT, ORIGINAL CONTRACTS, OWNERSHIP STRUCTURE, PARTICULAR CONTRACT, POLITICAL ECONOMY, PORT OPERATIONS, PORTS, POSITIVE EXTERNALITIES, POWER, POWER MARKETS, POWER PLANTS, POWER SECTOR, PRESENT VALUE, PRINCIPAL-AGENT MODEL, PRINCIPAL-AGENT PROBLEM, PRINCIPAL-AGENT RELATIONSHIP, PRIVATE FINANCE, PRIVATE FINANCING, PRIVATE OPERATORS, PRIVATE SECTOR, PRIVATE SECTOR INVOLVEMENT, PRIVATE SECTOR PARTICIPATION, PROCUREMENT MECHANISM, PROCUREMENT OFFICIALS, PROCUREMENT PROCEDURE, PROCUREMENT PROCESS, PRODUCT QUALITY, PROPERTY RIGHTS, PROVISION OF INFRASTRUCTURE, PROVISIONS, PUBLIC, PUBLIC ASSETS, PUBLIC CONTRACT, PUBLIC CONTRACTS, PUBLIC ECONOMICS, PUBLIC FINANCE, PUBLIC GOODS, PUBLIC INFRASTRUCTURE, PUBLIC INVESTMENT, PUBLIC OWNERSHIP, PUBLIC PRIVATE PARTNERSHIPS, PUBLIC PROCUREMENT, PUBLIC SAFETY, PUBLIC SECTOR, PUBLIC SECTOR PRODUCTIVITY, PUBLIC SERVICES, PUBLIC TRANSPORT, PUBLIC UTILITY, PUBLIC WORKS, PUBLIC­PRIVATE PARTNERSHIPS, QUALITY REQUIREMENTS, RAIL, RAIL PRIVATIZATION, RAILWAY, RAILWAY SECTOR, RAILWAYS, REGULATORY SYSTEM, RELATIONAL CONTRACT, RENEGOTIATED CONTRACTS, RENEGOTIATION, RENEGOTIATIONS, RETRENCHMENT, RETURN, REVENUE GUARANTEES, RISK NEUTRAL, ROAD, ROAD CONCESSIONS, ROLLING STOCK, SAFETY, SANITATION, SAVINGS, SELLER, SELLERS, SERVICE PROVIDER, SEWERAGE SERVICES, SOCIAL WELFARE, SPEEDS, SUBCONTRACTORS, TARIFF ADJUSTMENTS, TELECOMMUNICATIONS, THIRD PARTY, TIME REQUIREMENT, TRAFFIC, TRANSACTION, TRANSACTION COST, TRANSACTION COSTS, TRANSPARENCY, TRANSPORT INFRASTRUCTURE, TRANSPORT INFRASTRUCTURES, TRANSPORT SECTOR, TRUE, UTILITIES, VALUATIONS, VENDORS, VERTICAL INTEGRATION, WATER SUPPLY SERVICES,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090715105832 https://hdl.handle.net/10986/4185
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