Public-Private Partnership: Transaction Costs of Tendering

Abstract

What are the transaction costs of participating in a public-private partnership (PPP) tender? Prior research indicate that there is a significant amount of resources required. However, few researchers seem to measure transaction costs directly. The purpose of this paper is therefore to fill this knowledge gap by presenting estimated transaction costs from both public and private actors. The underlying approach for this research was a case study of a new primary school in Norway. This case was chosen because of the expedient access to detailed information of the tendering process. The main source of data was documents and estimated figures obtained from public and private actors involved. Additionally, focused interviews were used to clarify any ambiguities. We find that there are significant costs involved that can be explained by the nature of the PPP tendering process. These findings contribute to a better understanding of the costs associated with a PPP tender process, providing an opportunity for public actors to establish a more attractive arena for private actors to participate, together with a better-informed decision making from private actors.