Ex-ante versus ex-post value for money in highway public–private partnerships: evidence from Korea

This study conducts a rigorous ex-post Value for Money (VfM) assessment of eight Korean highway Public–Private Partnership (PPP) projects to examine how realized outcomes compare with the ex-ante expectations set in their final concession agreements and to identify the key determinants of fiscal efficiency. Updating these forecast-based ex-ante figures with realized operational data, we find that aggregate VfM improved substantially – from KRW 1138.6 billion (63.4%) ex ante to KRW 2769.6 billion (80.2%) ex post – representing a 16.8 percentage-point increase. Project-level outcomes vary systematically with traffic demand realizations. When traffic volumes fall short of forecasts, the Public Sector Comparator (PSC) fully absorbs fiscal losses, whereas PPP contracts transfer demand risk to the private sector, thereby mitigating public exposure. As a result, VfM improvements are predominantly observed in projects with demand underperformance. For projects subject to Minimum Revenue Guarantees (MRGs), however, the PSC also incurs substantial losses, narrowing the fiscal gap between PSC and PPP outcomes. This finding implies that the fiscal implications of MRGs should be evaluated relative to the PSC benchmark rather than solely in absolute terms. Although MRGs are shown to be fiscally unfavourable ex post, this does not necessarily imply that the original decision to adopt PPPs was misguided at the time of procurement. Overall, the results indicate that favourable VfM outcomes are driven primarily by realized demand conditions and risk allocation mechanisms, rather than by any inherent fiscal superiority of PPPs. The study offers policy implications for strengthening demand forecasting, applying revenue guarantees more selectively, and institutionalizing systematic ex-post VfM assessments to improve PPP governance.