The process of negotiating contracts is especially costly (for both the public and private sector parties) because of the high cost of legal, financial and technical advisory services usually brought in.
Dudkin and Välilä (2005) found that, for a sample of 25 hospital PFI procurements in the UK, ex ante transaction costs for the public sector and the winning bidder were some 8% of the total investment cost (split evenly between the public sector and the winning bidder). Of course, the public sector procurer ultimately bears both sets of transaction costs-its own, and the private sector's through higher contract prices. (2008.)