Public–Private Partnership Tenders

The scope of the paper is to provide a guiding methodology in the design of public–private partnership (PPP) tendering processes on the basis of the number of potential bidders in the market (existing competition) and their respective transaction cost. Analytical models, initially proposed by McAfee and McMillan, are further investigated with respect to the various tendering procedures by recalling the dynamics of transaction costs for competitors in the PPP market. The proposed methodology, in the form of a graphical instrument, potentially provides an optimum balance between existing market competition and tender transaction costs. The methodology also has the potential to protect against market concentration. The proposed graphical instrument reduces excessive transaction costs for the public and private sectors and proposes tendering procedures suitable to the existing market. The present research work, based on reported findings, takes an alternative approach and reports on how to exploit all existing competition in the market through the tendering procedure. Therefore, this work takes a rational approach endorsing the notion that for a specific level of transaction costs there is a maximum number of bidders that may tender, and competition is optimum when that number is secured.