P3 The Unvarnished Truth

The overall lessons from the case studies suggest that the prognosis
for future P3s is somewhat pessimistic. Governments have generally
found it difficult to effectively reduce their financial and budgetary
exposure. Furthermore, in some cases, governments have faced
significant increased political risk rather than reduced risk as they had
hoped. At the same time, their for-profit private sector partners have had
difficulty making adequate rates of return, although this is a tentative
conclusion as they have usually had incentives to publicly emphasize
losses.
In some respects, the somewhat negative findings are not surprising.
The public and private partners in P3s inevitably have conflicting
interests (Teisman & Klijn, 2002; Trailer et al., 2004). Studies have
shown that in other contexts with similar conflicting interests, such as
mixed enterprises that are jointly owned by private shareholders and
government, the result can be “the worst of both worlds”, achieving
neither high profitability nor worthwhile social goals (Eckel & Vining,
1985; Boardman & Vining, 1989). In sum, while the allocation of
decision-making and risk-sharing in P3s can vary widely, if decisionmaking
authority and financial risk-bearing are not appropriately and
clearly matched, incentives will be misaligned and effective outcomes
are unlikely. This raises the question of whether governments can learn,
individually or collectively, to adequately specify contract conditions and
institutional conflict resolution mechanisms ex ante so that the past is not
a prologue for the future.