Comparisons Between Public-private Partnership(PPP)and Traditional Procurement(TP)

In public projects,the government needs to choose between the governmentprivate partnership(PPP)model or the traditional procurement(TP)model.The main characteristics of the two models are "bundling" and "unbundle",that is,whether each stage is completed by the same enterprise.In the process of project implementation,the government and social capital need to face project risks such as technological innovation,construction capabilities,operational capabilities,and market demand.The policy uncertainty caused by the government’s temporary adjustment of policies to improve social welfare may also cause damage to social capital interests and affect project investment.Different payment methods under the PPP will also have an impact on investment and social welfare,thereby affecting the choice of the two models.Based on the theory of incomplete contracts,this thesis compares which model of PPP and TP can bring more social welfare under the conditions of project risk and policy uncertainty.We found that under the project risk,when the PPP model is adopted,the positive externality investment is insufficient and the negative externality investment is excessive,and the positive externality investment is insufficient when the TP model is adopted.Examining the three payment methods of PPP,we found that:the government payment method and the TP model need to compare project risks.When the project risk is greater,the government payment method in the PPP model should be used;when the project risk is less,positive and negative externalities should be considered,when the positive externalities are large,the government will choose to pay;and the effects of user fees and feasibility gap subsidies will be affected by externalities,operating costs,user fees,and subsidies.Further introducing policy uncertainty,we find that social welfare will not be affected under the TP model in the short term,but the impact of social capital investment and social welfare under the PPP model is uncertain-if the increase in investment results in the transfer of government to social welfare partial increase will reduce investment and affect social welfare through the externalities of investment changes.The government payment and TP model do not need to compare the government transfer part,while the user payment and the feasibility gap subsidy need to compare this part.In the long run,policy uncertainty will reduce investment and increase market concentration,which is not conducive to the development of the PPP market.The results of this thesis can provide theoretical guidance for the "benefit sharing and risk sharing" of the PPP model and for the government to rationally choose related models,and provide theoretical support for the government to regulate the industry and reduce policy uncertainty through legislative or judicial channels.