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A study of the operationalization of management controls in UK's Private Finance Initiative (PFI) contracts

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Abstract

Utilizing evidence from a United Kingdom (UK) road case study Private Finance Initiative (PFI) project, this article considers how the UK central government's infrastructure strategy is operationalized through accounting-based performance measures and incentive systems, and articulates how the adoption of such systems is moderated by trust practices. The findings indicate that initial government policy objectives, translated as performance indicators in the case study, failed to offer adequate incentives for contractors and created tensions. However, controls were later developed through inter-party trust practices for managing performance and relational risk. These findings have important implications for PFI policy and practice, including that negotiation can: (i) lead to pragmatic controls being introduced to foster cooperation and trust-building; and (ii) provide opportunities for adapting the monitoring and incentive mechanisms. This study also contributes to the previous literature where PFI control systems were largely regarded as inadequate for dealing with unforeseen conflicts between parties.

Acceptance Date Jan 30, 2018
Publication Date Mar 26, 2018
Publicly Available Date Mar 28, 2024
Journal Public Administration
Print ISSN 0033-3298
Publisher Wiley
Pages 92-108
DOI https://doi.org/10.1111/padm.12401
Keywords Private Finance Initiative (PFI); Public Private Partnerships (PPPs); Accounting; Management controls; Performance measurement; Incentives; Trust
Publisher URL https://doi.org/10.1111/padm.12401

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