Responsive regulation in public‐private partnerships: Between deterrence and persuasion

Abstract

Design-Build-Finance-Maintain-Operate (DBFMO) contracts are a particular type of public-private partnership whereby governments transfer the responsibility for the design, construction, financing, maintenance, and operation of a public infrastructure or utility service building to a multi-headed private consortium through a long-term performance contract. These arrangements present a typical principal-agent problem because they incorporate a "carrot and stick" approach in which the agent (consortium) has to fulfill the expectations of the principal (procurer). This article deals with a neglected aspect in the literature related to the actual use of "the sticks or sanctions" in DBFMOs and assesses to what extent and under which conditions contract managers adopt a deterrence-based enforcement approach or switch to a persuasion-based approach, specifically when the contract clauses require the use of (automatic) deterrence. An empirical analysis of four DBFMOs in the Netherlands shows that the continuation of service delivery, the need to build trust, and the lack of agreement on output specifications play a role in the willingness of the procurer to apply a more responsive behavior that uses persuasion, even when deterrence should be automatically applied.

Performance regulation in a networked healthcare system: From cosmetic to institutionalized compliance

“…These insights contribute to scholarship on network accountability, which has often focused on the decreasing importance of regulators in governance networks and the regulatory failures resulting from accountability conflicts in networks (Osborne ). Thus, this study concurs with recent case studies of other successful regulatory action in networks (McDermott et al ; Mills et al ; Reynaers and Parrado ) to contribute to our understanding of how regulators can act as change agents in networks, especially in settings with heterogeneous, conflicting perspectives and motives of network participants.…”

The compliance model of employment standards enforcement: an evidence‐based assessment of its efficacy in instances of wage theft

“…There is also a longstanding debate in the legal literature about the use of compliance and deterrence approaches to regulatory enforcement (Gunningham, ; Reiss, ; Reynaers and Parrado, ). Compliance and deterrence theories are based on fundamentally different assumptions about the causes of legal violations and their normative significance.…”

Public-Private Partnerships

“…On the other hand, they create positive incentives (rewards) for good performance (Gomez-Mejia and Wiseman 2007). These mechanisms can be understood as enforcement strategies of deterrence and persuasion (Reynaers and Parrado 2016). The use of these two strategies may vary accordingly with the degree of dependence of the public procurer, trust between partners and the existence of clear performance standards.…”