Public–private partnerships and contract negotiations: an empirical study

Abstract

Despite the increasing popularity in the use of the public–private partnership concept as a procurement strategy, there have been reported cases of problems associated with the initial stages of the process in terms of unduly high bidding costs and pre‐contract time overruns due mainly to the protracted nature of the negotiations. Empirical research conducted in the UK has focused on the extent of these pre‐contract time and cost overruns. The key attributes of both the private sector consortia and the public sector organizations that have significant bearing on the efficiency of the pre‐contract processes are: the nature and strength of the consortium, the quality of the technical proposals they produce for the bid, and the quality of their financial proposals. For the public sector organizations they are the organizational capabilities and technical capabilities. The financial capabilities of the public sector are ranked lowest in influencing the procurement process. Whilst there was broad agreement on the ranking of importance for the various descriptive attributes, differences between the two sectors are revealed relating to risk, previous experience, evaluation criteria in the bidding documents and effect of public opinion. A better understanding of what is important to each party in the negotiations is an important step in improving the PPP process.

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