Managerial incentive and recovery from PFI project insolvency

PFI (private finance initiative) is a means of procuring public services through private investments. In this paper, a recovery procedure for PFI projects in Japan is proposed to secure a stable supply of necessary public services. The recovery procedure for PFI projects must include mechanisms to achieve recovery efficiently. In order to establish a bankruptcy procedure for PFI projects, their inherent characteristics and constraints should also be considered. This work first explains the desirable goals of bankruptcy procedures and presents the BAHM model, which has been proposed to solve the substantial problems facing private companies with regard to bankruptcy reform. Secondly, the characteristics and the constraints of PFI projects, different from those of private projects, are clarified. Finally, recovery procedures for PFI projects are proposed by applying the BAHM model and taking into account the particularities of PFI projects.