The Portuguese Experience with Public-Private Partnerships

J. Miranda Sarmento, L.D.R. Renneboog

Research output: Working paperDiscussion paperOther research output

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Abstract

Abstract: This paper documents the Portuguese experience in Public-Private Partnerships (PPPs). Since 1993, Portugal has been using PPPs intensively, mainly for highway construction and in the health sector. This has enabled the country to close the infrastructure gap and avoid the budget constraints at the moment of the investment. Doubts about whether PPPs represent value-for-money have emerged. There are several reasons why PPP were unsuccessful: (i) the concentration PPP projects was very high over a limited time span and the public sector was not prepared nor had the ability to manage and control the contracts, (ii) the incentive to resort to PPPs was mainly to avoid budget constraints, but not to use of public resources better by taking advantage of private sector efficiency, (iii) the risk allocation between the private and public sector was flawed because the private sector bore too little risk and payments from the public to the private sector were considerably above the investment cost. The current and future annual payments from the state to the private sector are a substantial burden in the current times of austerity and budget consolidation. As the country had to ask the troika (IMF, ECB, and European Commission) for a financial rescue from, PPP renegotiations are ongoing to reduce public payments.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages24
Volume2014-005
Publication statusPublished - 2014

Publication series

NameCentER Discussion Paper
Volume2014-005

Fingerprint

Public-private partnerships
Private sector
Payment
Budget constraint
Resorts
Value for money
Resources
Highway construction
Burden
Risk allocation
Renegotiation
Consolidation
Incentives
Health sector
Public sector
Portugal
Public and private sector
Costs
European Commission

Keywords

  • Public-Private Partnerships
  • Procurement
  • Project finance
  • Road construction
  • Portugal

Cite this

Miranda Sarmento, J., & Renneboog, L. D. R. (2014). The Portuguese Experience with Public-Private Partnerships. (CentER Discussion Paper; Vol. 2014-005). Tilburg: Finance.
Miranda Sarmento, J. ; Renneboog, L.D.R. / The Portuguese Experience with Public-Private Partnerships. Tilburg : Finance, 2014. (CentER Discussion Paper).
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Miranda Sarmento, J & Renneboog, LDR 2014 'The Portuguese Experience with Public-Private Partnerships' CentER Discussion Paper, vol. 2014-005, Finance, Tilburg.

The Portuguese Experience with Public-Private Partnerships. / Miranda Sarmento, J.; Renneboog, L.D.R.

Tilburg : Finance, 2014. (CentER Discussion Paper; Vol. 2014-005).

Research output: Working paperDiscussion paperOther research output

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N2 - Abstract: This paper documents the Portuguese experience in Public-Private Partnerships (PPPs). Since 1993, Portugal has been using PPPs intensively, mainly for highway construction and in the health sector. This has enabled the country to close the infrastructure gap and avoid the budget constraints at the moment of the investment. Doubts about whether PPPs represent value-for-money have emerged. There are several reasons why PPP were unsuccessful: (i) the concentration PPP projects was very high over a limited time span and the public sector was not prepared nor had the ability to manage and control the contracts, (ii) the incentive to resort to PPPs was mainly to avoid budget constraints, but not to use of public resources better by taking advantage of private sector efficiency, (iii) the risk allocation between the private and public sector was flawed because the private sector bore too little risk and payments from the public to the private sector were considerably above the investment cost. The current and future annual payments from the state to the private sector are a substantial burden in the current times of austerity and budget consolidation. As the country had to ask the troika (IMF, ECB, and European Commission) for a financial rescue from, PPP renegotiations are ongoing to reduce public payments.

AB - Abstract: This paper documents the Portuguese experience in Public-Private Partnerships (PPPs). Since 1993, Portugal has been using PPPs intensively, mainly for highway construction and in the health sector. This has enabled the country to close the infrastructure gap and avoid the budget constraints at the moment of the investment. Doubts about whether PPPs represent value-for-money have emerged. There are several reasons why PPP were unsuccessful: (i) the concentration PPP projects was very high over a limited time span and the public sector was not prepared nor had the ability to manage and control the contracts, (ii) the incentive to resort to PPPs was mainly to avoid budget constraints, but not to use of public resources better by taking advantage of private sector efficiency, (iii) the risk allocation between the private and public sector was flawed because the private sector bore too little risk and payments from the public to the private sector were considerably above the investment cost. The current and future annual payments from the state to the private sector are a substantial burden in the current times of austerity and budget consolidation. As the country had to ask the troika (IMF, ECB, and European Commission) for a financial rescue from, PPP renegotiations are ongoing to reduce public payments.

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KW - Project finance

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Miranda Sarmento J, Renneboog LDR. The Portuguese Experience with Public-Private Partnerships. Tilburg: Finance. 2014. (CentER Discussion Paper).