برای ساختن و یا نساختن : نظریه های اصولی و مثبت مشارکت های دولتی ـ خصوصی

This paper analyzes whether the two tasks of building infrastructures which are socially useful in providing public services and managing these assets should be bundled or not. When performance contracts can be written, both tasks should be performed altogether by the same firm if a better design of the infrastructure helps also to save on operating costs. Otherwise, tasks should be kept apart and undertaken by different units. In incomplete contracting environments we isolate conditions under which either the traditional form of public provision of services or the more fashionable public–private partnership emerges optimally. The latter dominates when there is a positive externality and the private benefits from owning assets are small enough. Finally, we take a political economy perspective and study how incentive schemes are modified under the threat of capture of the decision-makers. Much of the gains from bundling may be lost in this case.

One of the most intriguing issues in modern industrial organization consists of delineating the optimal division of labor between the public and the private spheres. In this respect, the recent privatization wave which took place over the eighties and nineties in most industrial countries and which was also advocated by international agencies for developing countries certainly testifies that this question is at the heart of most major reforms. Even though defenders of full privatization schemes can still be found nowadays in the most liberal spheres, an unequivocal commitment to privatization is often viewed as an excessive response to the inefficiency of the public sector (if any) even when privatization is accompanied by a convenient regulatory environment. Most scholars and public decision-makers advocate thus for a more pragmatic approach which consists of promoting efficient (or at least as efficient as possible) partnerships between the public and the private sectors for the provision of major services and public goods.2 Only tasks where the private sector has a comparative advantage should thus really be delegated to the private sphere. To understand the optimal pattern of delegation it is useful to keep in mind that most public services (like water management, waste disposal services, sanitation, public transportation, prison management) involve a complex array of tasks. Those activities necessitate indeed, first, to build infrastructures and, second, to operate these assets as efficiently as possible. Delegation to the private sector thus takes place de facto in a multi-task environment.3 The traditional form of public procurement used in most industrial countries has so far relied on some kind of unbundling of these tasks. First, a government designs the characteristics and quality attributes of the project. Second, the government chooses a private builder to build assets but retains ownership. Finally, the government chooses an operator, who may be either public or private, to manage these assets and provide the service. More recently, several initiatives around the world4 and various legal reforms5 have proposed an alternative form of procurement, the so-called Public–Private Partnerships (PPPs henceforth). With this procurement mode the government takes a more minimalist stance: it only chooses a private consortium which is in charge of both designing the quality attributes of the infrastructure, building these assets and, finally, managing them as efficiently as possible. Compared with the more traditional form of procurement, the PPP alternative is thus characterized by two important features. First, the two tasks of building and managing assets are now bundled. Second, the ownership pattern is also quite different. Taking first a normative point of view, the first objective of this paper is to understand why and under which circumstances those two alternative forms of procurement are optimal. Of course, this issue is really only relevant in a framework where delegation of tasks to the private sector also comes with some agency problem.6 To make the analysis interesting we will thus envision the case where efforts in building and managing assets are non-verifiable and delegation comes with moral hazard. We then ask whether or not agency costs exhibit some kind of economies of scope when tasks are bundled. The analysis shows that ownership and its impact on incentives is not the key to understanding the optimal form of procurement. Instead, the key reason for bundling is to be found in technology and in the impact of a good design on operating costs, not on the ownership issue which is only secondary. This result is quite robust to the space of compensation schemes that can be used by the local government to delegate the services and to the exact organizational form taken by the merger of two firms when tasks are bundled. Two cases are a priori feasible and are documented by practitioners. First, a better design of the infrastructure may help to save on operating costs, the case of a positive externality. The prison sector serves as a prime example because the design of a prison may significantly affect the cost of implementing a given security level.7 Second, a better design may also require learning new procedures for managing assets and thus increase operating costs, the case of a negative externality. As an illustration, the report made by the French Cour des Comptes following the Roissy Airport Terminal E2 crash argued that an important issue was that Aéroport de Paris cumulated several ‘hats’ as an owner of the infrastructure, a designer and a builder. It argued that this bundling of tasks induced a sacrifice in terms of the quality of the infrastructure. With a positive externality both tasks should be performed by the same firm which is better able to internalize the impact that a better infrastructure design has on operating costs. Intuitively, under moral hazard, there is a trade-off between providing incentives to the builder to improve the quality of the infrastructure and giving him insurance against adverse shocks on the realized quality. This trade-off calls for reducing the power of incentives so that the builder exerts less than the first-best effort. This decreased quality of the assets may excessively increase the operating costs and thus exerts a negative externality on the operator if building and managing assets are unbundled. The builder and the operator should thus be merged into a single entity. The optimal organizational form exhibits thus an important feature found in public–private partnerships. For a negative externality, the two tasks should be split because solving the agency problem on one task exacerbates the incentive problem on the other. This is reminiscent of the tasks separation occurring under standard procurement practices. The previous argument behind the optimal organizational form is thus unrelated to the ownership issue. In practice, performance contracts are, however, not always feasible and ownership matters. For instance, the quality attributes of an infrastructure may be hard to specify in advance so that complete contracting with a builder may be difficult or even impossible to write. Ownership provides then incentives to improve quality. The allocation of ownership can thus be viewed as a specific form of contracts with imperfect incentive alignment and imperfect insurance properties.8 When incentives for building can only be provided by allocating ownership, the decision whether to bundle the two tasks may help to improve the quality-enhancing effort. For instance, when the private owner does not have enough private incentives to improve the quality of the assets, making him also responsible for the management of these assets fosters incentives in the case of a positive externality. In such incomplete contracting environment the modern form of public–private partnerships emerges when private owners have rather weak incentives to enhance assets quality compared with what would be socially optimal. On the other hand, the traditional form of procurement emerges when the externality is negative and uncertainty on the realized quality of the assets is too large to let private owners bear such risks. Although the normative arguments above have certainly some appeal, they do not explain the fierce opposition to the modern form of public–private partnerships that is sometimes found among practitioners and political decision-makers. Opponents often argue that this organizational form may increase the scope for capture of the decision-maker so that the possible efficiency gains from bundling may be offset by influence costs.9 In fact, as a decision-maker may find both bundling and unbundling optimal depending on the kind of externality between tasks, he may exert his discretion to favor the industry by this organizational choice. To analyze these issues we must significantly extend our model. First, the decision-maker must have private information on the sign of externality so that manipulations of his decision can be made at the expense of the general public. Second, the operator willing to integrate backwards into infrastructure building must also obtain some rent from doing so and, here again, some sort of private information is needed.10 Now, the political economy drawback from the bundling decision becomes clearer. Because bundling is called for in the case of a positive externality, it raises also incentives to improve operating costs. Under adverse selection, this is a source of a greater information rent.11 Even when the externality is negative and unbundling is socially optimal, the operator has an incentive to bribe a (non-benevolent) decision-maker to integrate backwards and also build the infrastructure by herself. When the social cost of such collusion is taken into account, bundling may not be as attractive. Let us now turn to a brief review of the literature. Two papers address issues close to ours: Bennett and Iossa (2002) and Hart (2003). Both papers lie in the realm of the property rights literature à la Grossman and Hart (1986): Inefficiencies in assets quality-enhancing and cost-reducing efforts stem from the hold-up problem that arises when no contract can be written and only ex post negotiation between the government and the operator and/or builder is feasible. Although ex post efficient, this negotiation generates payoffs which depend on the threat points defined by the ownership structure.12 By a reasoning close to the one we will make in our more complete contracting environment, a positive externality somewhat weakens the hold-up problem on both tasks and calls thus for integration. Even though they are similar in spirit, our findings should nevertheless be distinguished and contrasted. First, even though, we are quite sympathetic to the idea that the quality of assets may be hard to describe in advance, so that complete contracts with a builder may be difficult to enforce,13 one may be more skeptical of the use of this paradigm when it comes to analyzing the relationship between the government and the operator. Operating costs are readily observable and often used in practice to contract for service provision. This suggests that the role of ownership might have been overemphasized so far. More basic agency problems may actually explain much of the organizational forms which emerge, even though the distortions due to ownership allocations can be superimposed. Second, because the property rights approach de-emphasizes informational issues, it cannot endogenize the stake for capture and address the political economy issues which are crucial to getting any positive theory of public–private partnerships. This is where a second important insight available within our framework lies. This paper belongs also to a broader theoretical literature which investigates task assignments in organizations in the presence of agency problems. In pure moral hazard environments, Holmström and Milgrom (1991) showed that incentives in one task may destroy incentives in another when tasks are substitutes in the agent's cost function; a result which suggests that tasks should be split when there is a negative production externality. Although the result that complementary tasks should be bundled altogether can also be found in Holmström and Milgrom (1990), Macho-Stadler and Perez-Castrillo (1993), Itoh (1994), and Ramakrishnan and Thakor (1991) under various forms, the specific context of public–private partnerships and, most specifically, the sequentiality of tasks imposes some specific assumptions on contracts under unbundling and a more thorough discussion of what is cooperation between separated entities than what the existing literature provides.14 In particular, we will distinguish below between the case where the two tasks are bundled altogether and performed by the same agent, keeping her risk tolerance as given, and the case of a consortium where the two tasks are jointly performed. The first of these organizational choices focuses on the incentive effect of bundling tasks, whereas the second one introduces risk-sharing benefits which are already well-known from the literature.15 From a methodological perspective, when considering the bundling of tasks, our analysis allows one to clearly disentangle the impact on incentives from the benefit associated with improved risk-sharing. Schmitz (2005) investigates a sequential moral hazard model with limited liability as the source of the agency problem, no production externality but with the added twist that the outcome of the first project affects the cost of incentives on the second one. Finally, in pure adverse selection frameworks, Baron and Besanko, 1992 and Baron and Besanko, 1999, Dana (1993), Gilbert and Riordan (1995), Laffont and Martimort (1998), Mc Afee and Mc Millan (1995), Mookherjee and Tsumagari (2004), and Dequiedt and Martimort (2004) have also discussed whether bundling tasks and having a single agent privately informed on cost parameters related to each task dominates unbundling when tasks are perfect complements. The paper is organized as follows. Section 2 presents the model. Section 3 addresses the respective optimality of bundling and unbundling tasks when both the builder and the operator receive a compensation scheme which depends only on their own performance. This means that, although the operator's cost may later on reveal some information on the builder's effort, costs are not used to compensate the builder. Under bundling the two tasks are undertaken by a unique firm, the merger of the builder, and the operator. Section 4 generalizes our findings to the case where the cost realizations can also be used to compensate the builder and delayed payments are feasible. Section 5 enters in more detail into the process of merger formation. Within a consortium two otherwise identical risk-averse firms perfectly coordinate their decisions and share risk. Again bundling is optimal for a positive externality but may also be so for a negative one thanks to a coinsurance motive. Section 6 tackles the ownership issue and isolates conditions under which either the more traditional form of procurement or the more novel form of public–private partnerships dominates. Section 7 discusses the political economy of the model. Section 8 briefly concludes by presenting alleys for further research. Proofs are relegated to an Appendix.

The presence of a production externality between building and operating assets raises the issue of the optimal organization of such tasks. Bundling allows to better internalize this externality and improves incentives when the externality is positive, thereby increasing welfare. In contrast, when the externality is negative, unbundling reduces agency costs and is socially preferable. Hence, a simple and technology-driven reason is at the heart of the decision to bundle or unbundle the various activities. This result is obtained under a class of restricted schemes where the compensation of an agent depends only on his own performances, but it holds more generally with a larger class of compensations, whether the decision-maker relies on a single agent or on a consortium to perform both tasks and even under asymmetric information and the risk of capture. In each case, we showed how the basic lessons of our framework should be modified and, in particular, the directions towards which cost-reimbursement rules should be distorted to account for various contractual environments. Even though this organizational issue seems a priori somewhat orthogonal to the ownership issue which has often been pushed forward in the PPP literature, it helps to understand part of the debate about it. To the extent that ownership of an infrastructure is a very crude contract, but sometimes the only feasible one, leaving ownership to the builder might be the only device to provide incentives to building and designing it efficiently. The discrete contractual choice of whether to leave ownership does not allow to fine tune incentives as efficiently as under more complete contracts. Nevertheless, the insights obtained in our more complete contracts framework might at least partly carry over. Depending on the private benefits that the builder withdraws from ownership and the risks he bears when acquiring assets, public–private partnerships – defined as the joint bundling of tasks and allocation of ownership to the builder – might nevertheless outperform the more traditional form of public procurement (where a local government keeps ownership of the assets and chooses two different contractors at each stage) in the case of a positive externality. The reverse may happen for a negative externality. Of course, all the extensions investigated in this paper could also be possibly cast in an incomplete contracts setting. We feel reasonably confident that the results found in more complete contracting environments would carry over at least to some extent, but, certainly, some more formal analysis is required to qualify this assertion. Coming back to our initial complete contracting framework, several other extensions seem to us particularly attractive. First, it could be worth coming back to the maintained assumption that the firms' degree of risk-aversion was kept constant as one changes organizational modes. Section 5 has gone some way towards endogenizing that degree but certainly more could be done. More specifically, one may be interested in tracing out the impact of organizational forms (whether firms are multi-taskers or not) on their access to the financial market and thus on the amount of risk they should keep as a result of frictions on these markets. The corporate finance literature (see Leland and Pyle (1977), for instance) suggests reasons (related most notably to asymmetric information and frictions in getting access to the capital markets) why firms may not be able to fully diversify. In a full-fledged model one might want to analyze how the decision whether to bundle activities affects these frictions on the capital market. The implicit assumption that we maintained here was that these frictions remain by and large independent of the chosen organizational form but the validity of this assumption should be further investigated. Second, in our modelling of consortia between builders and operators, we have assumed that efforts of the member firms could be coordinated efficiently. This assumption should be relaxed. Consortia may be inefficient when they suffer from internal agency problems. These problems may tilt the organizational choice towards unbundling. In an incomplete contract perspective this would make a stronger a case for the more traditional form of procurement. Third, our approach of the political economy of PPPs has been very partial in stressing only one aspects of it: the possibility of excessive manipulations by decision-makers to favor the formation of large conglomerates. We show that a robust form of procurement immune to the risk of capture goes towards low-powered incentives and cost-reimbursement rules that might not really help firms to internalize the gains from bundling. This is clearly reminiscent of a move towards traditional forms of procurement. The extent to which the choice of procurement modes responds to political forces remains nevertheless by large to be investigated. Finally, it could be worth investigating whether competition between potential builders and between operators may also change the incentives to form consortia and the decision of whether to bundle activities.