Effects of Contract Governance on Public Private Partnership (PPP) Performance

This paper empirically examines the impact of differences in contract attributes on project outcomes. The hypothesis is to test whether better incentive structure and stricter administrative controls lead to more efficient project outcomes. It compares two sets of contracts (called as toll and annuity) from Indian PPP road projects which are designed for the same task and implemented under the similar conditions, but have some differences in the contract governance attributes. It carries out this exercise using data from more than 150 projects. The empirical findings highlight how instruments of governance influence the degree of efficiency in achieving the desired results. For instance, the annuity model, that has tighter budget constraint (i.e. better incentive structure) than the toll model, performs better in terms of minimizing cost and time overruns.