Transaction costs, relational contracting and public private partnerships: a case study of UK defence

Parker, David; Hartley, Keith

doi:10.1016/s0969-7012(02)00035-7

Cited by 207 publications

(148 citation statements)

References 25 publications

Supporting

Mentioning

132

Contrasting

Unclassified

Order By: Relevance

“…In terms of financial reporting, "managers smooth or manage earnings upward to please investors" (Dechow and Skinner, 2000) cited in (Scott, 2009), however on the heels of the Enron scandal, these same managers adopted the opposite approach "to minimize wealth transfers from political solutions as predicted by the political cost explanation" (Scott, 2009). In the UK also, "the National Audit Office has also criticised the profits made by private companies on certain PFI deals (NAO, 2008) cited in (Parker and Hartley, 2003), this type of occurrences coupled with failures like those experienced in Enron where regulatory laxity led to the loss of billions of dollars in equity investments, retirement benefits and unquantifiable 'Social profit' has brought the issues of effective monitoring to the fore.…”

Section: The Need For Monitoringmentioning

confidence: 99%

“…Therefore with the public sector expected to be transparent in its transaction with private sector organisations, there is a lot of pressure on them to monitor performance and more recently environmental issues closely, this is because "fixed capital formation through PPP projects has become big enough to have macroeconomic and systemic significance in a number of countries" (BlancBrude et al, 2009). Hence "there are concerns that unless contracts are tightly specified, private firms might economise on the quality of output (Parker and Hartley, 2003) because "mega projects clearly bring together, under various contractual arrangement, differing and competing partners, interests, values and modes of rationality (ways of doing and thinking)" (Marrewijk et al, 2008). …”

Section: The Need For Monitoringmentioning

confidence: 99%

“…"not only are PFI/PPP projects amongst the most complex from a management perspective, the differing objective between the public and private sectors and the public expectations can lead to difficult relationships" (Walker, 2007). "Social, economic, political and technological change is inevitable: while the details of changes cannot be accurately predicted, the fact of change is inescapable and is one of the distinctive hallmarks of a progressive society" (Froud, 2003) commenting further on the uncertainties inherent in longterm contracts (Parker and Hartley, 2003) observed that "It is difficult to write complete contingent claims contracts (allowing for uncertain events) especially where contracts cover lengthy period of time, technologies and costs are inherently uncertain or the economic environment is in a state of flux", hence "If government relies on third parties and empowered employees to achieve public purposes, it will have to monitor their performance" (Rosenbloom et al, 2008).…”

Section: The Challenges In Monitoringmentioning

confidence: 99%

“…As has been observed by many commentators on PFI and its contractibility, "It is difficult to write complete contingent claims contracts (allowing for uncertain events) especially where contracts cover a lengthy period of time, technologies and costs are inherently uncertain or the economic environment is in a state of flux (Parker and Hartley, 2003). Therefore it becomes pertinent for the public sector officials to be well aware of this and try to create an environment of mutual respect between both parties while not taking their eyes off the main objectives of the project.…”

Section: Lack Of Environmental Management Knowledgementioning

confidence: 99%

“…"PFI, in its purest form, is a Design, Build, Finance and Operate (DBFO) system. There are a number of factors that have given rise to the use of this procurement strategy and these factors differ from one country to another, while some believe it "offers better value for money than the Public Sector Science Publications AJEAS Comparator (PSC) (Parker and Hartley, 2003), for others it is used to "manage design risks, time and cost overruns" (Fewings, 2005); in Malaysia, it is used "to attract private sector capital and expertise in developing infrastructure assets and services" (Siang, 2008). Internationally and particularly in developing countries, PPP/PFI is seen as attractive in terms of its capacity to achieve the transfer of technological knowledge to local enterprises and bring in international finance for local project development.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Improving Client Internal Capability to Monitor Public-Private Partnerships Projects: A Review

Umar¹

2012

American Journal of Engineering and Applied Sciences

View full text Add to dashboard Cite

Public-Private Partnerships (PPP) or Private Finance Initiatives (PFI) are increasingly becoming very popular with governments across the globe for the provision of public infrastructure and services. When contracted, the public sector client believing the private sector will act in accordance with 'bounded rationality', ignores the constant monitoring and review process which is an integral part of any project. However, the failures of some of these partnerships and the social and economic costs incurred due to laxity in monitoring reminds us of the need to develop the permanent bureaucratic machinery of government, who share the government's unique objectives of end-users satisfaction rather than shareholders', to perform the monitoring of these projects. Though the public sector has been delivering projcets for dacades, the complexities associated with the PFI strategy has opened up new challenges for its staff. Most failures and moral harzards are only discovered after scandals evoke investigations like the case of Enron or when public criticisms force the government to reverse their decision as in the case of the Skye toll bridge by which time a lot of damage would have be done. Literature has shown that when employees are trained and engaged in organisational decisions and policy planning they make policy executions easier. Therefore, considering the Theoretical ideology behind the PFI of the asset being returned to the Public sector at the end of the concession, it becomes pertinent for proper training of the public sector staff. Public sector officials, if adequately trained and motivated can perform the tasks being contracted out to private consultants thereby re-affirming government's commitment to its Value for Money (VFM) proposition. Though the public sector staff strength has been depleted due to the adoption of New Public Management (NPM), however the remaining qualified staff can be pooled to create an 'incubator' from which a formidable monitoring team would evolve through the use of project management 'Core Team concept'.

show abstract