Choice of contracts in the British National Health Service: An empirical study

Following major reforms of the British National Health Service (NHS) in 1990, the roles of purchasing and providing health services were separated, with the relationship between purchasers and providers governed by contracts. Using a mixed multinomial logit analysis, we show how this policy shift led to a selection of contracts that is consistent with the predictions of a simple model, based on contract theory, in which the characteristics of the health services being purchased and of the contracting parties influence the choice of contract form. The paper thus provides evidence in support of the practical relevance of theory in understanding health care market reform. © 2008 Elsevier B.V. All rights reserved.

Costs, outputs and outcomes in school PFI contracts and the significance of project size

This article examines operational Private Finance Initiative (PFI) school projects and reports the experiences of UK headteachers. It considers the impact of project size on value for money (VFM). Headteachers involved in small projects are more satisfied with costs than those involved in large projects, but headteachers involved in larger projects are more satisfied with affordability. Generally, heads are more satisfied with the buildings than with the services. The authors question the government’s recent policy changes to increase the size of PFI projects.

Accountability and Value for Money in Private Finance Initiative Contracts

Within the context of New Public Management (NPM), successive UK governments have claimed that PFI projects provide more accountability, and arguably, more value for money (VFM) than conventional procurement for the public (HM Treasury 1995, 2000, 2003a and 2003b). However, recent empirical research in the UK on PFI has indicated its potential limitations for accountability and VFM (Broadbent, Gill and Laughlin, 2004; Edwards, Shaoul, Stafford and Arblaster, 2004; Shaoul, 2005; and Ismail and Pendlebury, 2006) albeit these are based on either published accounts or a limited number of key stakeholders. This paper attempts to partially redress this gap in the literature by presenting an interesting case of the impact of PFI on accountability and VFM in Northern Ireland's education sector. The findings of this research, based on forty two interviews with a wide range of key stakeholders, suggest that stakeholders have different and often conflicting expectations and the actual PFI accountability and VFM benefits are much more obfuscated than those claimed in Government publications.

Trust considerations on attitudes towards online purchasing: The moderating effect of privacy and security concerns

The research examines the relationships between three common trust considerations (vendor, Internet and third parties) and attitudes towards online purchasing. The study incorporates privacy and security concerns as a moderating variable and finds that these relationships vary depending on the level of concerns a consumer has when purchasing online. The study suggests that "fears" surrounding the Internet as a place to do business still hinder the use of it for e-commerce purposes, but that the presence of a reputable agent might in some manner mitigate this risk. In the context of business to consumer relationships trust in the vendor is important for the consumer to accept any risk associated with a transaction. Theoretical implications for online customer behavior theory are also discussed. © 2009 Elsevier Inc.

Coalitional Games and Contracts Based on Individual Deviations

We study what coalitions form and how the members of each coalition split the coalition value in coalitional games in which only individual deviations are allowed. In this context we employ three stability notions: individual, contractual, and compensational stability. These notions differ in terms of the underlying contractual assumptions. We characterize the coalitional games in which individually stable outcomes exist by means of the top-partition property. Furthermore, we show that any coalition structure of maximum social worth is both contractually and compensationally stable.

Purchasing power parity versus fixed exchange rate rules: A stability and welfare analysis

This paper evaluates the desirability of PPP rules vis-á-vis fixed exchange rates both in terms of welfare and stability properties. The analysis is conducted within a small open-economy New Keynesian framework extended to include a cost channel. In terms of stability, we find that while the equilibrium is always unique under fixed exchange rates its uniqueness critically depends upon the presence/absence of the cost channel under a PPP rule. Overall, then, in terms of welfare a fixed exchange rate always outperforms a PPP rule.

Accountability and Value for Money: A Framework for Exploring the Relationship in Private Finance Initiative Contracts

There is an implicit assumption in the UK Treasury’s publications on public-private partnerships (PPP) – also more commonly known in the United Kingdom as private finance initiative (PFI) - that accountability and value for money (VFM) are related concepts. While recent academic studies on PPP/PFI (from now on as PFI) have focused on VFM, there is a notable absence of studies exploring the ‘presumed’ relationships between accountability and VFM. Drawing on Dubnick’s (Dubnick and Romzek, 1991, 1993; Dubnick, 1996, 1998, 2003, 2005; Dubnick and Justice, 2002) framework for accountability and PFI literature, we develop a research framework for exploring potential relationships between accountability and VFM in PFI projects by proposing alternative accountability cultures, processes and mechanisms for PFI. The PFI accountability model is then exposed to four criteria - warrantability, tractability, measurability and feasibility. Our preliminary interviews provide us guidance in identifying some of the cultures, processes and mechanisms indicated in our model which should enable future researchers to test not only the UK Government’s claimed relationships between accountability and VFM using more specific PFI empirical data, but also a potential relationship between accountability and performance in general.

The Diffusion of Risks in Public Private Partnership Contracts

Purpose The UK government argues that the benefits of public private partnership (PPP) in delivering public infrastructure stem from: transferring risks to the private sector within a structure in which financiers put their own capital at risk; and, the performance based payment mechanism, reinforced by the due diligence requirements imposed by the lenders financing the projects (HM Treasury, 2010). Prior studies of risk in PPPs have investigated ‘what’ risks are allocated and to ‘whom’, that is to the public or the private sector. The purpose of this study is to examine ‘how’ and ‘why’ PPP risks are diffused by their financiers. Design/methodology/approach This study focuses on the financial structure of PPPs and on their financiers. Empirical evidence comes from interviews conducted with equity and debt financiers. Findings The findings show that the financial structure of the deals generates risk aversion in both debt and equity financiers and that the need to attract affordable finance leads to risk diffusion through a network of companies using various means that include contractual mitigation through insurance, performance support guarantees, interest rate swaps and inflation hedges. Because of the complexity this process generates, both procurers and suppliers need expensive expert advice. The risk aversion and diffusion and the consequent need for advice add cost to the projects impacting on the government’s economic argument for risk transfer. Limitations and implications The empirical work covers the private finance initiative (PFI) type of PPP arrangements and therefore the risk diffusion mechanisms may not be generalisable to other forms of PPP, especially those that do not involve the use of high leverage or private finance. Moreover, the scope of this research is limited to exploring the diffusion of risk in the private sector. Further research is needed on how risk is diffused in other settings and on the value for money implication of risk diffusion in PPP contracts. Originality/value The expectation inherent in PPP is that the private sector will better manage those risks allocated to it and because private capital is at risk, financiers will perform due diligence with the ultimate outcome that only viable projects will proceed. This paper presents empirical evidence that raises questions about these expectations. Key words: public private partnership, risk management, diffusion, private finance initiative, financiers