Sweden faces a growing need for infrastructure investment, while competition for public resources is intense. Could greater use of public–private partnerships (PPP) be part of the solution? This question is examined by researcher Ingemar Bengtsson in a new SNS report that identifies a possible pilot project.
PPP is a way of organising infrastructure projects in which a private actor assumes overall responsibility for financing, constructing, operating, and maintaining a facility over a longer period. Since the 1990s, this model has become common in Europe. In Sweden, however, there is only one true example in transport infrastructure: the Arlanda Line, completed in 1999.
The report Alternative ways of building and operating infrastructure – lessons from international research is based on a review of international research and previous public inquiries, including Financing Infrastructure with Private Capital? (SOU 2017:13) and the SNS report New Ways for Infrastructure. Research shows that PPP projects are on average completed more quickly and with a lower risk of cost overruns than traditional procurement models.
– Properly designed, PPP leads to better cost control, shorter construction times, and better maintenance over the asset’s life cycle. Given the very substantial infrastructure investment needs facing Sweden, PPP is an underused opportunity to deliver more infrastructure per krona invested, says Ingemar Bengtsson.
Traditionally procured infrastructure projects tend to become increasingly expensive and exceed their budgets. For example, the ongoing expansion of the Stockholm metro is seven times more expensive than the previous expansion carried out between 1975 and 1985.
But PPP is not without risks. Bengtsson warns that weak public-sector contracting competence can result in vague contracts, inappropriate risk allocation, and incentives that fail to promote desired outcomes such as cost control and short construction times.
– Sweden needs to test and evaluate PPP in practice in order to build knowledge and competence in a Swedish context. This is why I emphasise the need to strengthen contracting competence, Bengtsson concludes.
Key conclusions of the report
- PPP can increase efficiency if risks and incentives are properly designed: Efficiency gains arise when contracts allocate risk in a way that reflects the parties’ actual control and competence, and when the remuneration model provides the right long-term incentives.
- Sweden lacks practical experience and needs to build knowledge through pilot projects: PPP should be introduced gradually, with a focus on learning, evaluation, and competence development.
- Successful PPP requires strong public-sector contracting competence and coordination: This can be achieved through specialised project organisations within agencies, networks of engaged partners, and independent expert groups.
The researcher’s recommendations to policymakers
- Establish a national, cross-sectoral expert group with a mandate to drive the development of PPP solutions. Lessons can be drawn from the Arlanda Line project. The expert group should be responsible for launching and evaluating pilot programmes.
- Launch a systematic pilot programme with 4–6 PPP projects in different sectors. For example, the construction of two additional railway tracks between Lund and Hässleholm could serve as a suitable pilot within the transport sector.
- Ensure sufficient contracting competence through expert groups, training, and continuous evaluation of ongoing and completed projects.
- Create networks for knowledge exchange among authorities, contractors, and financiers, as PPP requires understanding from all sides of the partnership.
About the report
Alternative ways of building and operating infrastructure – lessons from international research is part of the SNS Analysis series. The aim of SNS Analysis is to make research accessible to decision-makers in politics, business, and public administration, and to help research reach the media. Financial support has been provided by the Jan Wallander and Tom Hedelius Foundation. The authors are solely responsible for the analysis, conclusions, and recommendations.
About the author
Ingemar Bengtsson is a researcher in economics and senior lecturer in real estate studies at Lund University.