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on Project, Program and Portfolio Management |
| By: | Frédéric Marty (IDEFI - Institut de droit et d'économie de la firme et de l'industrie - CNRS : FRE2814 - Université de Nice Sophia-Antipolis); Arnaud Voisin (Observatoire économique de la défense - Ministère de la Défense) |
| Abstract: | Private finance has brought to public-private partnerships a third-party overlook on the contracts. Bringing into the appraisal of PPP deals banks and rating agencies results in outsourcing the due diligence of the project to the party best suited to perform it. This reduction in asymmetries of information can occur both in the competition for the market stage or in the competition within the market stage (yardstick competition).<br /><br />At the negotiation stage, funding competition helps to increase the public sector's information on the deal. Of course, the cost of collecting this information should not overweight the savings it induces. In order to maintain competitive pressure through the lifecycle of the project, value testing schemes, as benchmarking or market testing are used. However, they induce concerns about transaction costs and could reduce the certainty about the charge for the public partner. |
| Keywords: | Private finance initiative, asymmetries of information, funding competition |
| Date: | 2008–01–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00202327_v1&r=ppm |
| By: | Asenova, Darinka; Beck, Matthias |
| Abstract: | During recent years, a wide spectrum of research has questioned whether public services/infrastructure procurement through private finance, as exemplified by the UK Private Finance Initiative (PFI), meets minimum standard of democratic accountability. While broadly agreeing with some of these arguments, this paper suggests that this debate is flawed on two grounds. Firstly, PFI is not about effective procurement, or even about a pragmatic choice of procurement mechanisms which can potentially compromise public involvement and input; rather it is about a process where the state creates new profit opportunities at a time when the international financial system is increasingly lacking in safe investment opportunities. Secondly, because of its primary function as investment opportunity, PFI, by its very nature, prioritises the risk-return criteria of private finance over the needs of the public sector client and its stakeholders. Using two case studies of recent PFI projects, the paper illustrates some of the mechanisms through which finance capital exercises control over the PFI procurement process. The paper concludes that recent proposals aimed at “reforming” or “democratising” PFI fail to recognise the objective constraints which this type of state-finance capital nexus imposes on political process. |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:wrc:ymswp1:34&r=ppm |
| By: | Asenova, Darinka; Beck, Matthias; Toms, Steven |
| Abstract: | The refinancing of PFI (Private Finance Initiative) projects currently represents one of the most contentious aspects of Public Private Partnership in the UK. The negative publicity associated with UK PFI refinancing deals is associated with two main factors, namely evidence of massive private sector profit making in connection with past refinancing deals, and the ‘failure’ of private sector financiers to share refinancing profits with public sector organisations in line with government recommendations. This paper examines the ongoing ‘dance of non-regulation’ associated with PFI refinancing on the basis of traditional Marxist notions of ‘contradictions of capitalism’. Our analysis commences with the argument that PFI represents a prototypical case of an alliance between finance capital and the state, which has been created with the principal purpose of establishing a new source of profits for the private sector. A Marxist analysis of state-business relationships would predict such an alliance to show tendencies towards instability which could arise from a number of factors. These include, among others, the inherent lack of legitimacy of such an alliance vis a vis established policy goals and the stakeholders associated with them; a lack of a credible regulatory framework which, as a systemic prerequisite of private sector profit making, further exacerbates existing problems of legitimation; and, perhaps most importantly, the potentially self-defeating attempt by capital to maximise gains from the exploitation of the existing alliance without concern for the possibility of a political or regulatory backlash. Examining the recent history of PFI refinancing we find evidence of most of these destabilising tendencies which we expect to trigger calls for a greater regulation of PFI projects in the future. |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:wrc:ymswp1:35&r=ppm |