The choice of the mode of realization of large public investment projects, including large infrastructure projects, between the conventional mode (PSC - public sector comparator) and the PPP mode (public-private partnership), involves two major groups of challenges and pitfalls. These are not the only major challenges and pitfalls, but they are the most pervasive. First, the evaluation of the investments themselves: the (uncertain) forecast of the costs and benefits of the project, the identification and management of real and financial risks, the cost of capital and the discount rate. Then, the evaluation of "contracts" or more generally of the "governance" PSC vs. PPP in imperfect and incomplete information contexts: the role and power of incentives for performance, effectiveness and efficiency. Many documents and reports reveal a serious misunderstanding of the economic analysis of the value of a public project, an inadequate or even erroneous understanding of the rules of modern finance, in addition to errors in analytical logic that make reports fatally flawed.
Health, Education, Infrastructures, Evaluation of public projects, mode of realization, PSC, PPP, incentive contract, incomplete information.;
TSE Working Paper, n. 20-1104, May 2020