From the incomplete contracts perspective, renegotiation is beneficial for both parties because it allows them to correct inefficient outcomes that would arise because of contract incompleteness, i.e. they can make mutually advantageous deals on issues not envisaged before. But the previous discussion on SBC has emphasized that anticipated renegotiations distort incentives ex ante, and that the bargaining power of both parties affect the outcomes resulting from a contract revision. In particular, it has suggested the threat of concession termination by the private partner could back demands for new contract terms that only benefits it and have nothing to do with correcting inefficient outcomes. Indeed, fearing disruptions in the service provision, the public sector may end up satisfying the private partner's demands.
The risk that the private partner abuses renegotiation increases with the existence of enforcement problems. If the public-sector party finds itself unable to force the private-sector party to meet the original contract terms, it can hardly oppose a change in these terms required by the private-sector party, no matter how unacceptable the change could be from the public sector 's perspective (provided that this new contract terms are enforceable). Thus, the renegotiation may entail a rent-shifting benefiting the private partner, who calls for the revision aiming to exploit the public sector's inability to enforce the original contract (Guasch et al., 2006). Moreover, the lower is the enforcement, the higher is the probability of shifting rents, and thus the stronger is the incentive for the private-sector party to call for a contract revision.
Beyond enforcement problems, the public sector may lack transparency and accountability, thus providing incentives for corruption (Lobina and Hall, 2003). It was argued the quality of enforcement is negatively related with the level of corruption, which also affects the probability of renegotiation (Guasch, 2004). Corruption may be related with illegal payments made by the private-sector party. Bribes aim to align the public sector's interest with the private partner's rather than to the public interest. As long as the private-sector party believes the public sector can be bribed, it will bribes in order to increase its chances of appropriating rents in a contract renegotiation. Hence, lack of public accountability mechanisms alters the bargaining relationship in renegotiations, while corruption opportunities distort the parties' behavior.