Introduction

Upgrading public infrastructure and improving the delivery of public services are important challenges for all governments. Many countries—including the new member states of the European Union (EU) and several of the non-EU economies in Europe—have been facing particularly strong demands for increasing the quality of public infrastructure to improve competitiveness and accelerate economic development. At the same time, tight budget constraints have often forced governments to seek out new options for supplying public infrastructure, including by relying more on private sector resources. In this context, public-private partnerships (PPPs) are frequently being considered as an alternative to traditional public procurement to realize a wide range of infrastructure investments while achieving better value for money (VfM). However, PPPs generate significant fiscal, macroeconomic, and reputational risks for governments, including by creating large contingent liabilities that may have adverse implications for government budgets and for fiscal and macroeconomic sustainability.