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Renegotiating PPP Contracts: Reinforcing the ‘P' in Partnership

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The issue of renegotiation is becoming increasingly important as a tool to address uncertainty of public private partnership (PPP) projects and as a mechanism to restore its economic and financial equilibrium. This paper aims to understand how and why renegotiations occur in long-lasting PPP projects and what are the pros and cons of the renegotiation. We depart from a literature review on contract incompleteness and on the determinant factors for the renegotiation of infrastructure concessions. To illustrate the discussion, the case studies of nine European PPP projects are analysed by examining the specific exogenous and endogenous determinant factors that conduce to renegotiating contracts. The implications of contractual renegotiations are explained and summarized through a comparison of our case studies with literature. Although renegotiation, per se, is not a solution for the successful implementation of PPP projects, our findings reinforce the idea of contractual flexibility as a tool that allows adapting to uncertainty. Moreover, effective communication mechanisms allow a better response to unforeseen events, reinforcing the partners’ commitment to deliver a win–win project.
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Keywords: SWOT; concessions; incomplete contracts; renegotiation; transport

Document Type: Research Article

Affiliations: 1: Department of Transport and Regional Economics, University of Antwerp, Stadscampus, Prinsstraat 13, Antwerp, 2000, Belgium 2: Faculty of Transport and Traffic Engineering, University in Belgrade, Vojvode Stepe 305, Belgrade, 11000, Serbia

Publication date: March 4, 2015

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