In PPP, the cooperative sharing and mutual support of the parties is based on an efficient risk allocation. Such allocation provides incentives to the parties for undertaking actions aimed at controlling the overall cost of the PPPs. Nonetheless, risk allocation is effective only when it is founded on reliable basic assumptions; when risks are able to be managed by the bearing party and; when the non-bearing party does not take the risk back in the operational phase. Political pressures may nonetheless mine the institutional integrity of PPP constitution processes. Particularly, the need of aligning project completion with political cycles may cause the speeding up of prefeasibility studies, which constitute the basic assumptions for risk sharing. This may trigger material underestimation of risks and consequently nullify or reduce drastically the cost-saving effect of risk transfer to the private party.
The indiscriminate risk transfer to the private sector may also be used to artificially lay-off the weight of cost intensive infrastructure from public balances. This may nonetheless increment the total cost of the infrastructure service delivery as risk allocation is connected to the correspondent reward associated with the risk-bearing. Risk allocation must therefore be tailored to the individual projects and their cost-predictability. This may also open the possibility of sharing risks ex-ante through alliancing techniques or redistributing rewards proportionally to the private and public party, particularly in case of positive refinancing.
Output based specifications of private party performances free in most circumstances the public sector from important project risks (among others, design and construction), they also allow the private party to provide innovative cost-effective solutions. Yet, above all, they position users as main beneficiaries of the partnership. In this context, empowering users and affected stakeholders may mean connecting their satisfaction to the payment mechanism of private partners. Conversely, if payments to the private party are generally contingent to private performance, a failing payment mechanism may equally weaken the major incentive for the private party to deliver. A discretional and ambiguous payment mechanism may also favor collusive behaviors of the parties, or eventually, jeopardize the public-private relation by favoring conflicts (normally caused by difficult interpretations). Moreover, empowering stakeholders may also mean ensuring that the public is informed of the social and environmental impacts of PPP infrastructure projects. This can be reached by encouraging better administrative arrangements to take these impacts into account, and facilitating users and stakeholder consultation and protection in regulatory decisions.
In fact, the complex, technical and extensive nature of PPP contract makes its understanding and control particularly difficult. Yet, the multi-annual commitment of extensive amount of public funds makes the transparency of PPP agreement even more needed. The simple disclosure of contract terms is therefore a mandatory element for reassuring the community, structuring a stable fiscal policy, and allowing national auditors to scrutinize PPP deals. That disclosure is nonetheless sufficient per se to inform non-specialized user, taxpayers or even Members of Parliament in charge of scrutinizing public finance budgets. The mandatory requirement of contract summary's publication may enhance the usefulness of contract term transparency as well as its effectiveness and accessibility. Yet, full transparency has so far suffered constraints due to commercial confidentiality. Issues such as profit margin, private entity cost, intellectual property matters, etc have been considered not appropriate to be raised in the public arena. The level of disclosure should nonetheless be increased also in those cases, eventually delegating to supervising entity (such as national auditors) the decision of recommending the timing for releasing sensitive information, depending of the nature of the infrastructure services implied and the public fund committed.