For a government with a limited ability to commit to contractual obligations, it is difficult (and perhaps, impossible) to provide credible guarantees to the firm's financiers. This reveals a more institutional perspective on the enforceability of PPP contractual arrangements and hence on attaining desirable outcomes in PPP projects.
If the partners' interests in renegotiating the contract are to be eliminated, it is essential that the project be partially financed with external funds and that debt finance be strategically employed. However, Danau and Vinella (2014) argue that a credible third party should be involved, under whose aegis external sponsors can be involved and receive guarantees for their credits.
One could also think of creating some ad hoc institution that should perform the specific task of acting as an "external guarantor" in the enforcement of PPP contracts in institutional environments where the partners (and, in particular, the government) fail to commit to their contractual obligations. This possibility implicitly calls for an appropriate separation of powers and specialization of tasks at the institutional level.
One option would be the suggestion by Bhattacharya, Romani, and Stern (2012). They argue for the creation of a new development bank specifically dedicated to promote infrastructure and sustainable development as well as to operate in a technical assistance capacity in the selection, management, and funding of infrastructure projects, which is particularly needed in developing countries. Existing development banks, including the World Bank and regional development banks, are also increasing their focus and financing on the question of public investment gaps. This issue is taken up further in Section 3.