PPPs and Project Overruns: Evidence from Road Projects in India

Construction cost overrun and time overrun are significant problems in infrastructure projects. This study provides a comparative analysis of the incidence of project overruns in Public Private Partnership (PPP) and non-PPP road projects. Data from national road projects in India was used as the study sample. Means analysis, both using an unmatched sample and matched pair analysis indicated significant overruns between PPP and non-PPP projects. While cost overruns were higher in PPP projects, time overruns were higher in non-PPP projects. These trends persisted in OLS regression estimates. A three stage least squares regression estimated to address the simultaneity bias also showed that use of PPP increased cost overrun, though it did not affect time overrun. Results obtained in this study are contrary to the findings of the previous studies, which have been based on PPP projects in developed economies. The findings emphasize the need for developing countries like India to strengthen their capabilities in PPP models to take advantage of private sector efficiencies.

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