African Journal of Business Management Vol.5 (11), pp. 4023-4032, 4 June, 2011 Available online at http://www.academicjournals.org/AJBM DOI: 10.5897/AJBM10.1408 ISSN 1993-8233 ©2011 Academic Journals Review Revisiting the Portuguese experience with public- private partnerships Carlos Oliveira Cruz 1 and Rui Cunha Marques 2 * 1 Department of Civil Engineering and Architecture, Instituto Superior Técnico, Technical University of Lisbon Avenida Rovisco Pais, 1049-001 Lisbon, Portugal. 2 Center for Management Studies (CEG-IST), Technical University of Lisbon, Avenida Rovisco Pais, 1049-001 Lisbon, Portugal Accepted 16 December, 2010 Over the past decades, large investments have been made in energy, transportation, health, and water supply, among other public services, in order to foster economic growth and allow for better living conditions. Public budgets constraints and an inability to manage large and complex projects widened the private sector involvement in providing and managing public services, though few countries choose to completely liberalize sectors of special public interest. Until a couple of decades ago, infrastructure delivery followed traditional procurement models where the service was contracted under a list of specifications, based on a simple transaction model, with no long-term relation. Today, Public-Private Partnerships (PPPs) arrangements are the preferred mechanism to deliver large infrastructure. Portugal’s experience in developing PPP projects started in 1994, in the road sector, and results have encouraged the expansion to other sectors. These projects placed Portugal as the largest EU country in PPP spending in percentage of GDP. Mistakes were made, and lessons learned. This paper addresses the development of PPP arrangements in Portugal, where several large-scale projects were developed under this procurement scheme, extracting lessons and policy implications for governments, practitioners and academics. Key words: Public-private partnerships, infrastructure investments, Portugal. INTRODUCTION The world development depends on the existence of efficient and reliable networks of infrastructure and public services, like energy, transport, health, and water supply, to give a few examples (Priemus et al., 2008). Their scale brings growing complexity and demands large capital availability (Bosch-Rekveldt et al., 2010). Most of public service infrastructure are natural monopolies, and impose large costs (investments and environmental impacts) to society but also have positive externalities (e.g. time savings and access to water and energy). Due to their special role, public infrastructure and services are ultimately a government responsibility, even when provided under a market-based structure (Marrewijk et al., 2008). While facing the challenge of decreasing the *Corresponding author. E-mail: rui.marques@ist.utl.pt Tel: +351 218 417 981. Fax: +351 218 417 979 infrastructure gap, governments are exposed to an increasing pressure to cut back costs and investments in order to reduce the public deficit. There is a trade-off between decreasing the infrastructure shortage, fostering the economy, and achieving a bearable investment and operating cost. In developing countries this trade-off is even more acute due to low coverage in basic infras- tructure and lower financial resources from governments. The search to achieve an optimal solution leads to a reorganization of the system. For example, when in the 80s the British Government was looking for “quick wins” to allow capital inflow, the British Airport Authority (BAA) and several utilities related industries such as telephone, electricity, gas and water were sold. Later, in the 90s, also in the UK, Public Finance Initiative (PFI) was developed as an innovative model for service provision and financing (Allen, 2001). Procurement techniques range from traditional procurement models (public work contracts), where a pre-determined service is delivered by a private company