Governments regulate PPPs for infrastructure services to tackle four types of risk. First, private participation in these services raises potential concerns on conflicts between the profit motive of private partners and the need to protect the public interest, since these services meet basic needs. Second, time inconstancy problems, as just discussed, can trigger opportunistic behavior among stakeholders. Third, competitive markets for infrastructure services are often lacking, raising the risk of reduced incentives for efficiency improvement. And fourth, significant problems exist with information asymmetry associated with private sector involvement. Faced with these factors, governments must monitor the performance and service quality of infrastructure PPPs. The objective in regulating PPPs is to protect public interests, deliver value for money for the public sector, ensure a fair and reasonable return for private investors and financers, and improve service delivery.
In practice, not all these objectives get enough attention in the design and implementation of PPP projects in infrastructure services. A lot of attention is generally given to objectives related to economic regulation, but social regulation is often neglected. The inherent conflicts between different objectives also need to be considered. The prioritization, relative weights, and balancing of these objectives are important for designing regulatory systems. However, these broad objectives may, not be the same as the aims of regulatory institutions. Without proper coordination, these institutions may pursue different goals, which can result in inefficiency.