This research paper by Laure Athias and Stéphane Saussier (2018) examines the flexibility of toll road concession contracts, analyzing the impact of uncertainty and contractual characteristics on price provisions.
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[...] To do this, they used a a unique original database of toll road concession contracts mainly French, and considered 14 non-French projects signed in Greece, the UK, Canada, Portugal, Benin, Chile, and Thailand. To measure the government's ability to formulate and implement policies, the global indicator REGULATORY QUALITY developed by the World Bank was used. The article used 68 toll road concession contracts (motorways, bridges, tunnels), of which 54 are French. These contracts were made available by different French concessionaires under a confidentiality condition. The data on traffic uncertainty was collected through interviews with three different people from a private French concessionaire: the CEO and two other senior executives. [...]
[...] Among the rigid adjustment processes, that is, among the toll adjustment processes that do not allow for negotiation between the contracting parties, the most strict is the \"fixed price\" contract, which they called in which the price is specified as being independent of future events. However, these contracts are rarely used in infrastructure concessions due to the high degree of uncertainty they entail. Automatic provisions that periodically adjust tolls according to a predefined formula are more common. The most extreme and rigid form of this category is the defined indexation, noted by the authors, which adjusts tolls according to an explicit and predefined schedule. [...]
[...] The most flexible option in this category leaves the concessionaire with total freedom to determine and impose tolls over a ten-year period, then establishes an "NTEP" with adjustment by indexing to cost indices for the remainder of the concession "FREE/NTEP/COST". Some parts of the sample used have also developed negotiation provisions that the authors noted which consist of determining ex ante periodic ex post negotiations of the initial adjustment process. The parties thus periodically take into account all relevant information before reaching an agreement on the toll. [...]
[...] The fact that the concessionaire is a mixed economy company seems to make the contract more rigid. This can be explained by the fact that when the company in charge of the concession contract for the toll road is jointly held by the state and a private operator, as is the case for semi-public concessionaires, 'it is easier for the contracting parties to adapt the contract to unforeseen circumstances since there is a common directory of the board of directors and a veto right on strategic decisions'. [...]
[...] or Your comments/critiques on the article The article is very rich and sheds light on the issue of contractual flexibility in PPPs (Public-Private Partnerships). It carefully examines the processes by which contracting parties adjust prices in toll road concessions, adopting an approach based on the economics of transaction costs. The results showed that traffic uncertainty, trust between contracting parties, and strong institutions promote flexibility. The article used data from French concession contracts, as well as non-French contracts signed in a country in America (Canada), Europe, Africa (Benin), the United Kingdom, and Asia (Thailand). [...]
