How Much Vertical Integration? Contractual Choice and Public-Private Partnerships in the United States

Abstract

Efficiency gains in Public-Private Partnerships derive from risk transfer and the bundling of different tasks. We study the factors that explain bundling in single contracts. We focus on the choice between integrating operational tasks alone or construction tasks alone, versus vertically integrating both operational and construction tasks. We analyze a new data set that includes 553 PPPs that were concluded in the United States. We find evidence that some financial variables play a role in bundling decisions. In addition, market size and the type of economic sectors involved, are also important drivers of contract choice and bundling decisions.