IAE Paris/chaire ePPP
“Public-Private Partnerships and the Life Cycle of Contracts: The Case of Water Industries in France”
Public-Private Partnerships and the Life Cycle of Contracts: The Case of Water Industries in France
Simon Porcher (GREGOR, IAE Paris)
Abstract: Recent empirical and theoretical advancements showed that in public-private partnerships incumbents could have an incentive to invest in the quality of the networks as the end of the contract approaches. Performance of the service should thus have a growing negative marginal impact on prices. This paper aims at testing this hypothesis through the life-cycle of the contracts measured in years or as the time remaining as a percentage of the contract. The sample consists in 2,040 public authorities for the French water services over 1998, 2001 and 2004. Results show that the marginal impact of the quality of the service on prices is increasingly negative when the contract gets closer to the end, i.e. for a given level of quality, prices tend to be lower. More data should be collected to confirm whether this result reveals a reputational effect in the end of the contract or is linked to a growing quality or a competitive effect through the life cycle of the contract.