Exploring strategies to reduce moral hazard and adverse selection of Ghanaian public–private partnership (PPP) construction projects

Anafo

et al. 2021

IJESM

Self Cite

Purpose Inefficiencies in the power sector resulting from underinvesting and underselling reduce the ability of governments to adequately finance energy projects. The purpose of this paper is to explore mechanisms of energy financing, benefits and challenges associated with innovative financing of energy infrastructure as well as strategies to improve innovative financing of energy infrastructure. Design/methodology/approach Questionnaires were used to elicit responses from respondents. Seventy-eight responses were retrieved. Mean score ranking, Kruskal–Wallis test and discriminant validity were the analysis conducted. Findings Partial credit guarantee; partial risk guarantee; credit enhancement; and loan guarantees were the significant mechanisms. Production efficiency; reduce pressure on public budgets; access to management expertise; and self-sustainability of infrastructure facilities were the significant benefits. Lack of transparency and adequate data for risk assessment; high up-front cost; heterogeneity, complexity, and presence of a large number of parties; and lack of a clear benchmark for measuring investment performance were the severest challenges. Complete transparency and accountability; political stability and public view on private provision of energy infrastructure services; and macroeconomic environment were the significant strategies. Practical implications This study is beneficial to energy sector as the current government of Ghana hints on willingness to involve private sector in management of the power sector. Originality/value The novelty of this study is that it is a pioneering study in Ghana on innovative financing of energy infrastructure.

Section: Contemporary Innovative Financing Approachmentioning

confidence: 99%

“…The provision of efficient, affordable and reliable infrastructural services is an essential requirement for economic growth and sustainable development (Canning and Pedroni, 2008;Owusu-Manu et al, 2020). The lack of a reliable energy supply and its inefficiencies comes at a huge cost ( _ Ipin and Ercan, 2021).…”

Section: Introductionmentioning

confidence: 99%

Exploring innovative energy infrastructure financing in Ghana: benefits, challenges and strategies

Anafo

et al. 2021

IJESM

Self Cite

“…PPPs are not a recent happening, in view of the fact that there are examples dating back several years ago (Wettenhall, 2010;Owusu-Manu et al, 2020). The contemporary IJESM 17,1 inclination of governments signing agreements with private bodies to make available services, nonetheless, officially started around the year 1992 in the UK once the government had the desire of using private financial support as an alternative for state-owned investment.…”

Section: Literature Review 21 Public-private Partnershipsmentioning

confidence: 99%

Motivations for engaging in PPP power projects in Ghana: comparison of the public and private sectors

Badu

Owusu‐Manu

et al. 2022

IJESM

Self Cite

Purpose In the past few years, the public–private partnership (PPP) model has become increasingly popular in the infrastructure projects of developing countries, especially in the power sector. The purpose of this study is to ascertain the motivations for engaging in PPP power projects in Ghana by comparing the public and private sectors. Design/methodology/approach Questionnaires were used to elicit responses from respondents using a two-round Delphi survey. Mean score ranking was used to rank the motivation factors, while reliability analysis was conducted using Cronbach alpha coefficient, and level of agreement was tested using Kendall’s concordance. One-sample t-test assessed the relative significance of these motivation factors. Findings For the public sector, the topmost motivations were achieving improved value for money; access to additional capital; increased certainty of projects; greater efficiency of project delivery services; and improved ability to deliver new infrastructure. For the private sector, the topmost motivations were obtaining of investment support; improvement in private sector’s international image; synergy with public sector; sharing of risks; and gaining of profits. Practical implications The findings of this study will lead to increased knowledge on the motivation factors for the public and private sectors engaging in PPP power projects in Ghana. Originality/value The output of this research contributes to the checklist of motivation factors for engaging in PPP power projects and contributes to the development of PPP practice.

Public Works Management & Policy

“…When a project is guaranteed by public authorities, the risk of strategic bidding by market players, adverse selection, and moral hazard increases (Wang, Cui, & Lui, 2018; Wang et al, 2019a, 2019b; Owusu-Manu et al, 2020; Di Bari, 2021). Actually, bidders may have no incentive to: (1) form optimal bidding consortia; (2) undertake careful and reliable assessments of the project’s features (e.g., capital, operational costs, and demand); or (3) select the best contractors and ensure the project’s overall efficiency.…”

Section: Introductionmentioning

confidence: 99%

Addressing Adverse Selection in Public-Private Partnership (PPP) Procurement: An Agent-Based Approach

Vecchi

Cusumano

Casady³

et al. 2022

In risky public-private partnership (PPP) projects, governments and public institutions tend to offer private investors certain guarantees for their participation. However, when public sector capacity and institutions are weak, these guarantees can generate moral hazard in the bidding process and lead to contractual renegotiations, resulting in a loss for taxpayers. Drawing on a sophisticated, agent-based model that recreates the complex dynamics of the PPP procurement process, this paper demonstrates public sector competency is crucial for limiting moral hazard when guarantees are offered in PPP projects.