(Un)bundling Public-Private Partnership Contracts in the Water Sector : Competition in Auctions and Economies of Scale in Operation
In public-private partnership transactions in the water sector, one of the alleged concerns is that there is little market competition at the auction stage. This paper casts light on a tradeoff between the competition effect at the auction level an...
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2008/01/8912687/unbundling-public-private-partnership-contracts-water-sector-competition-auctions-economies-scale-operation http://hdl.handle.net/10986/6457 |
| Summary: | In public-private partnership
transactions in the water sector, one of the alleged
concerns is that there is little market competition at the
auction stage. This paper casts light on a tradeoff between
the competition effect at the auction level and potential
economies of scale in service operation. If the authorities
design a large-scale public-private partnership water
transaction, it is expected to exploit operational scale
economies. But the competition effect may have to be
sacrificed. The paper shows a risk that the selection of the
contract size could be a very restrictive condition that
excludes many prospective bidders. Moreover, the paper
quantifies the optimal size of public-private partnership
contracts in the sector by estimating a cost function. The
analysis shows that economies of scale exist but tend to
diminish quickly as production increases. When the amount of
water sold exceeds about 40 million |
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