A transaction costs-based model to choose PPP procurement procedures

Abstract

Purpose – The purpose of this paper is to develop a decision model for choosing the tendering procedure in PPP that minimizes the transaction costs borne by the public sector. Design/methodology/approach – A conceptual model that relates the procurement procedures described in the EU legal framework to launch PPPs and the transaction costs, considering the level of information managed by each procurement procedure has been developed. The authors use this conceptual model to develop propositions about the impact that specific project- and country-related factors have on the choice of the procurement procedure that minimizes the transaction costs. Findings – The application of the proposed model to the case of the Italian highway “Cispadana” shows its usefulness in orienting the public authority’s choice between the different tendering procedures, taking into account project- and country-related factors. Research limitations/implications – The present study fills the gap existing in the literature on transaction costs of PPP projects and the procurement procedure used to launch those projects by developing a model that relates the level of transaction costs with a set of key factors, namely the level of information managed during the tendering process, the number of bidders, the project size, the project complexity, and the institutional environment. Practical implications – As for practitioners, the main contribution of this study lies in offering a tool for supporting the public authority in the decision-making process about the tendering procedures in PPPs without imposing the selection of a specific procedure. Originality/value – The approach developed provides a new tool to support the contracting authority in the design and choice of the tendering procedures in PPP.