No abstract

Drawing on evidence from three case studies, we show how the State's Financial Liability has worked in assigning risk in large PPP contracts in Spain. Project failure and the concessionaires' bankruptcy have resulted in the government having to assume heavy financial obligations, which have ultimately been absorbed by taxpayers and users. In contrast, Spain's leading construction companies, which were also major investors in the concessionaires, have been able to minimize their risk. Myopic PPPs have been entered into based on the transference of liabilities to taxpayers and users, and the, consequent, minimization of risks for the main private investors.

The detailed contracts between private parties and public sector project sponsors that provide for the construction and operation of transportation infrastructure are often referred to as public-private partnerships (PPPs). Risk-mitigation and risk-sharing arrangements are critical to the long-term success or failure of transportation PPPs. This article examines the distribution of the key risks inherent in a PPP across public sector and private sector partners in road infrastructure PPPs. It draws lessons from the use of alternative risk-mitigation mechanisms across several countries, focusing on how aspects of PPP concession contracts allocate risks on both demand and cost sides of an infrastructure facility.