Transaction cost analysis of public infrastructure delivery

Abstract

Purpose

The purpose of this paper is to offer a systematic assessment of the magnitude of transaction costs of public infrastructure delivery, based on the three attributes of transaction costs, being the asset specificity, uncertainty and frequency of a transaction.

Design/methodology/approach

Non-parametric tests were used to test the transaction cost differences between different procurement types.

Findings

The authors find empirical support, based on a sample of 172 public infrastructure projects in Belgium, that construction firms make higher relation specific investments to their transaction partners under a public-private partnership (PPP) than a under a traditional public procurement (TPP). In addition, the authors found that PPP transactions are burdened by a greater uncertainty and a less mature market than TPP transactions.

Research limitations/implications

Given the complexity of this research, the scope is limited to: a strict distinction between two procurement types, one geographical area, a limited time scope and a focus on the private sector. Hence, the authors suggest that further research broadens the scope of either one of these aspects in order to get a better understanding of the total transaction cost burden of the public infrastructure market.

Practical implications

This study offers policy makers form a better understanding of the transaction cost implications when evaluating different procurement types.

Originality/value

This paper serves as one of the first systematic comparative analyses of the magnitude and determinants of transaction costs for the delivery of public infrastructure.

Citation

De Schepper, S., Haezendonck, E. and Dooms, M. (2015), "Transaction cost analysis of public infrastructure delivery", International Journal of Managing Projects in Business, Vol. 8 No. 3, pp. 441-456. https://doi.org/10.1108/IJMPB-10-2014-0075