The Logic of PPP: Government as regulator

Governments have long had a role as an explicit regulator of monopoly activities and essential services. Whether through public sector ownership or through regulatory regimes established to control privatised utility... [ view full abstract ]

Governments have long had a role as an explicit regulator of monopoly activities and essential services. Whether through public sector ownership or through regulatory regimes established to control privatised utility operators, this role has historically been imbued with considerable legitimacy and institutional strength. Pricing, investment, information transparency, service standards and accountability matters have all been crucial to monitoring and regulating performance from the perspective of the public. In today’s age of regulatory capitalism, however, old ideas of planning, pricing, transparency and accountability have been reshaped. And under long term infrastructure PPPs, traditional ideas as to returns on capital and the very role of governments in the economy have been rethought. This paper compares the government’s traditional role as a regulator with its modern day counterpart role in structuring and negotiating long term infrastructure contracts - the new regulatory tool. The paper argues that bipartisan negotiations through private contract law give huge flexibility and a strong capacity to deal effectively with not only traditional regulatory components of performance but also a capacity to regulate a range of public policy sensitivities. It concludes that the latter characteristic as well as the former may well underpin the political success of PPPs around the globe.