Governance of Public-Private Partnerships: Lessons from the Italian Experience in Transportation Projects

Abstract

This paper addresses the governance of public-private partnerships (PPP) by looking at the Italian PPP experience in transportation projects. Literature and practice tends to see PPP as a static exercise by the public sector, often under budget constraints, to foster infrastructure development by relying on the private sector for financing and management expertise. Very little attention is given to governance issues within the PPP process: from the role of the public sector during and after contract award to the best use of public funds to ensure proper project realization. We will show that public authorities should take a dynamic attitude in pursuing a PPP process and rely on more qualified public officials, to encourage the most efficient participation of the private sector, while minimizing the public sector financial exposure, as well as project costs. This attitude contributes to the reduction of asymmetric information between the public and the private sectors and its implication for investment cost reduction, accelerated project delivery, and financing negotiations. After reviewing the main issues in the Italian infrastructure market, the paper discusses a successful PPP case study, the Milan Metro Line M4, and an unsuccessful PPP process, the rail link between Terminal 1 and 2 of Milan Malpensa International Airport.