Traditional procurement vs PPP in transport sector: Analysis of cost and benefit

In this paper, I analyze how the two different contractual arrangements i.e. traditional procurement (EPC) and Public Private Partnerships (PPP), which are widely used by government in procuring a transport project, generate different incentives for the contractors to undertake different types of non-observable investment. Then I compare project outcomes associated with these two contract forms in terms of probability and magnitude of cost overruns, construction and operation cost of project and social benefits generated. Results of this paper explain some of the stylized facts on different magnitude of cost overruns seen in practice. Both positive and normative analysis of transport procurement contracts is done.