Public–private Partnerships in Financing Infrastructure Development: Could Some Award Methods Generate X-Inefficiency?

Abstract

This article focuses primarily on analyzing the possible relation between infrastructure management projects under a Public­Private Partnerships (PPP) and X­Inefficiency. ​The premise of our empirical analysis is that some methods of contract awarding for selecting the right private sector partner, when subject to competition and transparency (competitive bidding), may contribute to the overall infrastructure goals of countries in general and in particular to reducing X­Inefficiency. ​For measuring, we assume that at least some decision making units (DMU) are successfully practicing maximization, while others may not be. The database covers projects awarded in low­ and middle income countries as classified by the World Bank and our initial sample consisted of 210 electricity generation [1]​​ projects (energy sector). The results show that award methods based on direct negotiation have a positive effect on increasing technical efficiency (or decreasing X­Inefficiency) compared to alternative methods like competitive bidding.