Does the private sector receive an excessive return from investments in health care infrastructure projects? Evidence from the UK

The aim of the paper is twofold. First, we suggest a methodology to identify the “fair” return to equity in PPP-PFI projects based on the estimation of the weighted average cost of capital (WACC) of project sponsors. Second, we use a sample of 77 PPP-PFI contracts signed between 1997 and 2011 in the UK health care sector for which we have access to the full financial information. The results demonstrate the existence of returns well in excess of the sponsors’ cost of capital. These findings are strongly indicative of excess returns to private investors, representing an element of bad value to the procuring public organizations, and highlighting significant problems in current procurement practices and/or the methods by which bids are assessed. Key