5.1 The need for capacity and institutional integrity in contract design

The highly complex nature of PPP deals poses a serious challenge to public administration capacity, which needs normally to be handled through highly expensive external consultants. Whenever austerity regulations or lack of resources reduces the possible reliance on such experts, the inexperience of normally underpaid public officials may be overwhelmed by the private partners' experts. This may lead to the drafting of contract provisions highly favoring the private partner. It may also favor dubious behaviors or put at risk the design of supervision mechanism which may jeopardize future accountability. On the other hand, the recurrent and indiscriminate use of external consultant may equally result in excessive (and often inflated) costs. In addition, the extensive use of eternal consultants may also produce the undesired transfer of privileged information to some of the competing bidders, especially when limited markets of such specialized consultants favor their conflicts of interest. To this regard specific incompatibility rules may reduce the emergence of such conflicts. Moreover, the standardization of commercial principles may be a useful tool in reducing misspecification of outputs, transaction cost and the incidence of corruption. Yet, the capacity of public official remains a central point which may suggest the creation of special advisory units aimed at supporting sectorial and local administration in structuring PPP deals. Those units are nonetheless exposed to other conflict of interest, whenever they operate as advisor and promoters. They are also exposed to political pressure to speed up the PPP preparation and bidding processes, if not alternating artificially such processes to make "white elephant fly".

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