Speaker: Dr. Ram Singh, Delhi School of Economics

Date & Hour: 27 August 2019, 4:15 pm

Venue: Seminar Hall 1

Title: Does choice of contract matter for cost and quality of highways?: Empirical analysis of PPPs vs. Traditional contracts

Abstract: During the last two decades, several countries have used Public Private Partnerships along with the traditional contracts for development of infrastructure. In this paper, we model the incentive structures induced by Public Private Partnerships (PPPs or P3) contracts and the traditional procurement contracts used for infrastructure. The model is used to predict outcomes under PPP contracts versus the traditional contracts. Predictions emanating from the model are tested using a large dataset of national highways projects in India. The empirical analysis examines validity of a widely held belief that PPP contracts are better than the traditional contracts in terms of the cost and quality of infrastructure. Using and an IV and quasi-exogenous variations in contract choices, we show that the construction costs are significantly higher for PPPs than the traditionally procured (non-PPP) highways. Besides, we compare the quality of PPPs with the non-PPP roads. Our analysis shows that the PPP contracts encourage life-cycle approach towards project costs. This effect is more pronounced for Toll-PPPs than for Non-toll-PPPs. Moreover, the quality of PPP roads is better than the traditional highways.