Given concerns regarding the actual and potential costs of PPPs, it is important that these are offset by gains in quality of service provision, including its efficiency, coverage and development impact. Indeed, the main rationale to enter a PPP agreement is the possible improvement in service delivery and efficiency by the private partner relative to what traditional procurement can offer. The evidence however suggests that this outcome is not always realized.
According to OECD (2008), studies in the UK and Australia found that PPP projects compared favourably with publicly procured ones in terms of indicators such as performance, completion on time and profitability. However, the OECD cautions that governments may have 'cherry picked' their best projects for delivery through PPPs; had these projects been delivered through public procurement, their performance may have been just as good. Other studies, such as that by Romero (2015), argue that evidence of efficiency gains is not convincing. In most cases, efficiency gains depend on the sector, the type and size of projects, the contractual agreement between public and private partners, and the country context in terms of regulatory environment and governance. For instance, based on a review of extant literature on the performance of PPPs in the health sector Roehrich et al. (2014, p. 113) highlights that while the review does not offer a coherent picture of PPP outcomes with regards to its benefits and disadvantages, there are a "significant number of studies raising concerns over PPP performance: it may stifle improvements because of limited contractor capacity compared to project size, that transaction costs are too high throughout the project life-cycle, there is limited integration between clinical service models and infrastructure design and delivery, and limited innovation in new-build healthcare PPPs" .
The inconclusive nature of the evidence on the performance of PPPs is exemplified by World Bank research (Gassner, Popov and Pushak 2009) on private participation in electricity and water in developing countries which pointed to an increase in efficiency gains but also a shortfall in investment by the private sector and a failure to lower prices for the consumer. "Given the young regulatory environments in developing countries, which often lack sufficient capacity for supervising public-private contracts" (p. 5), the authors suggest that a plausible explanation for this could be that the private sector operators reaped the gains in savings in the form of higher profits without passing on benefits to the consumer. Harris (2003), researching for the World Bank, offers another plausible explanation for efficiency gains failing to translate into lower prices in a number of instances. Given "prices were already kept a long way below costs" by governments for political and social reasons, cost efficiency gains were not sufficient to prevent constant or rising prices in many cases (Harris 2003, p. 13).
This suggests that efficiency gains on their own may provide only partial information on the broader welfare benefits of a project. Especially in the context of developing countries, there is also an important requirement to assess performance in terms of indicators such as impact on poverty, inequality and sustainable development. Evaluations within international organizations are less than fully affirmative about PPP contributions to the aspects of sustainable development or impacts on poverty, gender and environment. In its most recent evaluation of the World Bank's involvement in PPPs, the Independent Evaluation Group (IEG 2014, p. ix) states that PPPs between 2002 and 2012 were largely successful "according to the development outcome rating of project evaluations." However, such evaluations may still be too limited in scope when assessing whether PPPs promote sustainable development. The report further recognizes this challenge and highlights the need "to shed more light on important aspects of public service delivery - for instance, access, pro-poor aspects, and quality of service delivery." There is "not a single project with data available for all of the above-mentioned dimensions" and those on and pro-poor and fiscal effects are particularly sparse. Consequently, governments cannot assess how far PPPs benefited the poor, and advice on how to manage fiscal implications from PPPs can and is rarely given. Another important issue is the lack of long-term evaluation. The study assessed the long-term performance of only 1.6 per cent of PPPs that the WBG supported.8 Similarly, an IFC literature review on the gender impact of PPPs concludes that, despite policy level commitment, there is very little evidence of infrastructure projects taking conscious action on gender.
Authors like Romero (2015) and Hall (2015) also outline the challenges faced by PPPs in contributing to development outcomes. According to Romero (2015), the impact of PPPs on development outcomes is mixed and varies greatly across sectors. One possible reason for this could be due to the fact that PPP projects need to be commercially viable in order to attract private sector participation. This may in a number of instances exclude social infrastructure projects that have high developmental returns but financial returns that compare unfavourably with competing ventures and therefore fail to entice private sector interest. Moreover, while in some cases private participation results in improvements in service delivery, private companies have a greater incentive to strip out any elements of a service that might reduce their potential profits, including cutting jobs. Hall (2015) argues that PPPs select a small number of the most profitable projects, and persuade governments to prioritize spending on these projects, even if this distorts the development of public services. In Africa, for example, they finance high-tech hospitals in a few urban centres where there are enough wealthy people to support private medicine, but not the universal networks of clinics or the salaries of staff needed to provide healthcare for the poor. Similarly, in the case of urban infrastructure, a World Bank research paper (Annez 2006, p. 22) concluded: "PPI [private participation in infrastructure] is inherently limited in scope for financing urban infrastructure for the wide array of non-commercial infrastructure services cities need… Local governments need good sources of public finance to fund those services, and some form of government borrowing is needed for major investments in these areas to avoid inter-generational inequities."
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8 The IEG measured the long-term impact of 22 out of 1396 projects. (The IFC invested in 176 PPPs; MIGA supported 81 PPP projects, IFC PPP Advisory Services completed 140 transactions. The IBRD/IDA approved 353 lending and partial risk guarantee projects. This was complemented by 112 capacity building activities of the World Bank Institute (WBI) and 683 trust fund-supported advisory activities by the PPIAF.)