To the extent that experience with PPP in a specific sector accumulates, i.e. the PPP market matures, the public authorities could standardize parts of the contracts for that specific sector as a means to reduce the likelihood of contract and output misspecification. From ongoing projects in that sector it is possible to learn what the generic risks are, and then use this information to design a standard contract (or some parts of it) that allocates these risks properly. Thus, the use of standardized contracts also reduces transaction costs resulting from agreeing and drafting the contract, provided that both parties are willing to accept the standardized terms. 37 Finally, legislation for PPP contracts providing for the compulsory use of standardized contracts could reduce the incidence of corruption by making it impossible to offer bribes in exchange of favourable contract terms. Standardized contracts are widely used for example in the UK (see HM Treasury, 2007).
However, the compulsory use of standardized contracts also brings the cost of increased rigidity and, in particular, of valuable local or specific information not feeding into the standardized contract. This problem could be overcome by adopting an 'intermediate' approach towards contract standardization. The process of standardization could be governed by more general guidelines on how to write PPP contracts, more general and less rigid that a standardized contract. Alternatively, the public-sector party could be given the option to introduce motivated changes into the standardized contract. The benefit of this increased flexibility would then have to be weighed against the cost of a higher risk of corruption and favouritism.
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37 In PPP markets which are not mature, the use of guidelines on commercial principles could be a (probably imperfect) substitute for standardized contracts.