Effective governance for infrastructure concessions: balancing upfront selection with long-term adaptability

Abstract

Objective: To examine, through the lens of Law and Economics, the efficiency of the economic-financial qualification criteria established by Law No. 8,987/1995 for selecting concessionaires in long-term infrastructure contracts and to assess how these criteria affect contract performance under uncertainty and contractual incompleteness.

Method: A qualitative approach was adopted, using a deductive method, monographic procedure, and documentary research, including legislative review, literature review, and analysis of empirical studies on adverse selection, incentives, and information asymmetry in procurement processes.

Results: The study found that the statutory qualification criteria, based on short-term financial indicators, fail to capture the economic resilience required for contracts lasting 20 to 35 years. These generic indices can restrict competition, generate adverse selection, and exclude financially capable bidders. Evidence shows that complex sectors such as sanitation require tailored metrics, and that standardized criteria distort competitive dynamics when applied to concession contracts. The research also identified that contractual incompleteness increases long-term uncertainty and demands adaptive mechanisms capable of absorbing unforeseen shocks.

Conclusions: The standard qualification model is inefficient for concessions because it creates misaligned incentives and does not adequately assess long-term financial robustness. Overcoming these inefficiencies requires adopting sector-specific criteria, long-term financial projections, governance assessments, and flexible contractual tools such as hardship clauses and operational testing phases to reduce transaction costs and enhance contractual efficiency.