Public-Private Partnerships as rent-seeking opportunities: A case study on an unsolicited proposal in Lima, Peru

Abstract

Public-Private Partnerships (PPPs) are often seen as a panacea for a more efficient provision of public services and infrastructure. However, they may have adverse effects especially in weak institutional environments. This paper focuses on how the design and performance of PPP enabling mechanisms such as ‘unsolicited proposals’ (USP) permit and incentivize rent-seeking behavior in subnational contexts. It aims to elucidate the hazards of USP mechanisms by the incorporation of a perspective on incentives, which is important since it helps to map the environment where corruption and opportunism unfold. It also confronts the design of PPP policies with the specificities of certain political environments. The case-study on a large-scale road infrastructure project shows that the expected reliance on technical expertise and competitive procurement for guaranteeing public interest was outweighed by a number of design flaws. These problems were related to asymmetric, non-transparent and discretionary decision-making that led to a reallocation of unearned rents.