Responsive regulation for water PPP: Balancing commitment and adaptability in the face of uncertainty

Public-private partnerships (PPPs) can potentially overcome financial, quality, and efficiency issues common to public service provision in developing cities. The management of long-term infrastructure PPP requires complex administrative and regulatory inputs and sound institutional underpinnings to ensure partners' commitment to the contract over long time frames. Additionally, PPP governance typically necessitates adaptation mechanisms in order to accommodate high degrees of uncertainty and deal with changing operational conditions and new information. This paper proposes that PPP performance - both relational and instrumental - is contingent on a delicate, dynamic balance of credible commitment and adaptive capacity. Comparative case analysis offers a dynamic picture of how rules, relationships, and the quality of regulation shape a PPP's capacity to adapt to external shocks and new information. The cases also demonstrate the tradeoffs of promoting fidelity to the partnership agreement and making needed adjustments to contract settings and further show that PPP resilience may be positive or negative. For example, high degrees of uncertainty in the operating environment can lock in the PPP decision and, thus, promote survival at the cost of instrumental performance.