Discount Rates for the Evaluation of Public Private Partnerships

During the 1990s the world saw an unprecedented use of public-private partnerships for the delivery of public services, many of which succeeded in improving the efficiency of the delivery of public services. At the same time, the capital market shocks since the late 1990s and over-optimistic ex ante projections have caused many of these arrangements to either fail or require renegotiation. For others, the returns that the private sector partners have received are far above what would normally be considered the cost of capital for comparable public sector investments. This experience has spurred policy makers to demand that a comparison be made between the public and private provision of services to determine the overall value for money of public-private partnership ventures. A central question that must be answered before such a comparison can be made is the appropriate cost of capital or discount rate to use in both of these situations. The essays in this book address these issues directly and provide the latest views on this topic. Contributors include Donald Brean (University of Toronto), David Burgess (University of Western Ontario), Graham Glenday (Duke University), Arnold C. Harberger (UCLA), Glenn Jenkins (Queen's University), Chun-Yan Kuo (Queen's University), Mark Moore (Simon Fraser University), Christopher Shugart (independent), Michael Spackman (NERA), and Peter Spiro (Treasury of Ontario).