This paper explores the practice of contracting in public private partnerships (PPP). Focusing on the first Irish PPP to provide secondary schools, it draws on perspectives from transaction cost economics and socio‐legal theory. It finds that the ex ante contractual setting was undermined by pushing forward with the PPP before conducting an adequate level of project appraisal. It explores the experiences of key stakeholders in the ex post contracting stage and concludes that the conduct of contracting practice was not characterized by the shift to relational contracting expected under PPP. Whereas this approach to contractual governance did not hinder the development of broadly trusting relations between the client and contractor, this was not manifest in terms of relations between the contractor and schools. A significant degree of conflict was evident in some schools‐contractor relations, something which can be attributed to sources of transaction costs, including incomplete information, bounded rationality and uncertainty.

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In 1999, the Irish Government launched a programme of public private partnerships (PPPs). The programme has expanded rapidly as policy makers seek to address the country's acute deficit of physical infrastructure. The first PPP to reach the stage of operation is the contract for five secondary schools. The early evidence from this case demonstrates that the market for education projects is competitive. The contract was designed on the basis of securing an appropriate distribution of risk and limiting private sector rents from re-financing. However, the evidence indicates that this PPP has not resulted in significant innovations and the public sector has failed to provide any evidence of value for money. IntroductionThe 1990s have witnessed the emergence of public private partnerships (PPPs) as a key tool of public policy across the world. PPPs take different forms. Variants of the PPP model have been adopted for purposes such as investing in large-scale physical and social infrastructure and related services (for example, roads, schools and hospitals). Other variants of the PPP model have been adopted for the purpose of achieving wider public policy objectives such as combating social exclusion (for example, the Single Regeneration Budget in the UK).The current Irish Government has adopted an extensive programme of PPPs for the purpose of investment in infrastructure and public services. Since its introduction in June 1999, the proposed PPP programme has expanded rapidly. There are over 100 projects earmarked for investment using the PPP model and there are PPP projects at various stages of procurement in sectors such as roads, public transport, education and health.This paper presents an economic analysis of the first Irish PPP project to reach the stage where assets are built and services are in operation. It examines the rationale for and extent of Ireland's PPP programme. It reviews economic theories relevant to contracting models such as PPPs. Drawing from these theoretical perspectives it derives criteria for analysis of PPP contracts. It uses these criteria for the purpose of analysing the contract for the design, build, operation and finance of five schools in Ireland.

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