Horizontal and Vertical Agreements in PPPs

This chapter deals with corruption, favoritism, and collusion practices that economists call horizontal and vertical agreements. The authors first introduce the organization of such agreements, how damageable they are, and the way one can fight against these practices. Then, they propose to focus on the auction theory and mechanism design as a way to prevent vertical and horizontal agreements. Indeed, when it comes to complex contracts such as PPPs, negotiated procedures or adaptation of traditional procedures have the potential both to ensure competition and to provide the necessary flexibility to deal with skills and information asymmetries. The authors insist on the need of a robust institutional framework to ensure the credibility of ex ante mechanisms as well as of ex post sanctions.