Search

This paper confirms a positive relationship between the aggressiveness of bids and the probability of renegotiating concession contracts. We use a database of 113 concessions awarded in Peru, finding that a 1% increase in bidding aggressiveness increases the probability of contract renegotiation by 2.4%–3%. This impact is higher for the transportation sector. Our results are robust to several econometric specifications. These results confirm the hypothesis that bidders will submit aggressive bids to renegotiate contract terms once the government and concessionaire are tied, and competition is no longer possible. • This paper is framed within those that study the economic and institutional determinants of concession contract renegotiations. Specifically, our objective is to study empirically how aggressive bids in concessions induce a higher number of renegotiations of such contracts. • There are few papers showing the impact of aggressive bids on concession contract renegotiations. For this reason, we have chosen to review separately two bodies of literature. First, we review the contributions on the institutional determinants of concession contract renegotiations. Second, we review the few studies that show the relationship between aggressive bids and the consequent renegotiations of such contracts. In this sense, aggressive bids become another explanatory variable among the determinants of renegotiations that have been studied more extensively. • With respect to aggressive bids, we understand in this work that they are those whose winning bid differs substantially from the estimates indicated by Proinversión, according to the value of the awarded bid. Mathematically, we define aggressiveness of a bid as the absolute value of the following formula: [ABSTRACT FROM AUTHOR]

This paper evaluates the determinants of concession contract renegotiations in a developing country, Peru, for a sample of 50 build-operate-and- transfer (BOT) infrastructure contracts using two complementary empirical approaches: count data models and survival models. Hypotheses derived from the economics of procurement are confirmed. In particular, factors that relate to the design of contracts, such as contract incompleteness and contract complexity, are found to be relevant in explaining the phenomenon of repetitive renegotiations. Other important factors, including political and financial risks, are also revealed to be important determinants of renegotiations in this country, in particular, when the empirical method permits measuring the influence of these variables throughout the life of the contract. However, no evidence has been discovered to support the thesis that resources assigned to contract regulators reduce the incidence of renegotiations. Some policy implications for contract design and renegotiation processes are proposed. [ABSTRACT FROM AUTHOR]

This article illustrates the influence of interest groups on government and concessionaire contractual behavior in long-term public contracts. We show that government political commitments with stakeholders may represent a 'reputational investment', which reduces the incentives to enforce the contract and increases the willingness to accept renegotiation proposals. When observed by the concessionaire, particularly concerning 'politically sensitive' projects, this situation can be exploited to capture additional quasi-rents from the exchange relationship. Using a simple model and a case study, we show that the interactions of parties with influential stakeholders, in the context of weak institutions, can create favorable conditions for opportunistic behavior. • Interest groups influence on contractual behavior of parties in long-term public contracts is illustrated. • Political commitments with stakeholders may reduce the incentives to enforce the contract. • Interest groups influence can determine decisions either to terminate or continue with the contract. • Peru's South Interoceanic Road Project case shows how stakeholders created conditions for private opportunistic behavior. [ABSTRACT FROM AUTHOR]