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A government agency wants a facility to be built and managed to provide a public service. Two different modes of provision are considered. In a public-private partnership, the tasks of building and managing are bundled, whereas under traditional procurement, these tasks are delegated to separate private contractors. The two provision modes differ in their incentives to innovate and to gather private information about future costs to adapt the service provision to changing circumstances. The government agency's preferred mode of provision depends on the information gathering costs, the costs of innovation efforts, and on the degree to which effort is contractible.Keywords: Public-private partnerships; Integration versus separation; Information gathering; Incomplete contracts JEL Classification: D86; L33; H11 * E-mail: eva.hoppe@uni-koeln.de and patrick.schmitz@uni-koeln.de. We would like to thank the editor, David Martimort, and two anonymous referees for valuable comments and suggestions that have helped us to substantially improve our article. Moreover, we have benefitted from useful discussions with participants of the CEPR conference "The Role of Incentives, Information and the

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