Performance evaluation of public-private partnerships (PPPs) in developing countries: A case study of Bangladesh

Abstract

Since the emergence in the early 1990s, PPP options have become increasingly popular to the governments of both developed and developing countries. On average, US$ 95b are invested annually in the developing countries in the form of PPP options up until 2017. However, a mixed result is documented with respect to their performances. PPP arrangements include multiple stakeholders that have diverse interests associated with their particular affiliations, and accordingly the performance expectations of these stakeholders also differ. Traditional approaches to performance evaluation are unable to capture all of the expectations to be included in the process of PPP project evaluation. Hence, using appropriate performance indicators and analysing their relative importance in influencing the performance score of particular projects remains unexplored in the developing country context. Against this backdrop, this study examines current practices of PPP performance evaluation, develops a framework of weighted performance indicators for developing countries and applies the model in a number of PPP projects in Bangladesh. A mixedmethod approach has been used, which includes the analytical hierarchy process (AHP) for establishing weights of the key performance areas (KPAs) and associated indicators and a case study method for applying the developed model to selected PPP projects in Bangladesh. Results show that ‘financing’, ‘planning and initiation’ and ‘transparency and accountability’ are the most important KPAs in evaluating PPP performances in Bangladesh and ‘feasibility analysis’, ‘life cycle evaluation and monitoring’ and ‘optimal risk allocation’ are the most significant performance indicators. Unlike traditional performance evaluation methods, a prioritised set of performance indicators and KPAs for the PPPs of Bangladesh has been identified. The findings also reveal that sincere government commitment is relatively more important for the success of PPPs than the enactment of enabling legislation in the context of developing countries. This suggests more efforts are required to be employed by the host government to build confidence in the private partner selected for engagement in PPP arrangements. Furthermore, a framework for performance evaluation of power sector PPPs, based on the KPAs, has been proposed. This could be used for evaluating the performance of power PPPs in a more objective and systematic way in Bangladesh and other South Asian countries. Finally, the weighted process applied to the various performance indicators provides an improved understanding of the relative significance of KPAs and their component indicators. Attaching weights to the KPAs and performance indicators of PPPs, and applying those weights to derive individual project scores in a developing country context, especially in Bangladesh, represents an innovation and thus a contribution to the PPP performance literature. Awareness of the outcomes of the weighted performance evaluation process developed in this study could help project implementers and regulators prioritise their attention and resource allocation decisions related to achievement of performance improvement on the more significant key performance areas. The weighted process is expected to contribute to reducing biases of either perceived Likert scaled scores or only the weightings in PPP performance evaluation.