When might a project company break up? The perspective of risk-bearing capacity

Public-private partnerships (PPPs) have developed into a mainstream alternative procurement solution for the provision of public services. The aim is to explore a crucial but hitherto ignored issue in the study of PPPs: at what point a project company might break up. The project company's two-stage break-up in the National Physical Laboratory PFI project inspired this research in which a formal model is developed to demonstrate that contract break-up decisions can be plausibly explained through quasi-rent changes. This finding brings to the foreground the importance of taking into account risk-bearing capability in the design of project governance. How to achieve a level of risk-bearing capacity through the optimal use of financial, organizational and contractual means is a research area worthy of future exploration.