Accountability and governance in local public services: The particular case of mixed companies

The growing budget restrictions and decentralization processes that local governments face nowadays are threatening the sustainability of local public services. To overcome this problem, local decision-makers around the world have been developing ambiguous reforms, leading to various governance models. Since these services are essential for citizens’ welfare, it is crucial to determine whether or not these models have been effective and useful to cope with this state of affairs. To offer extra leverage to key projects, the European governments have been resorting to public-private partnerships (PPPs). One of the visible trends, which lacks further research, has been the use of mixed public-private companies (institutionalized PPPs). Although it is recognized that this solution can be interesting for both public and private sides, it has some particular features that can avert the aimed goals. This paper provides a literature review on mixed companies encompassing theoretical, legal and operational aspects. It also focuses on regulation by contract, referring to a particular Portuguese case study in the water sector and explaining how the municipality handled risk allocation and regulated the access to the market of private investors. Finally, it discusses the need for external regulation and makes suggestions on how these processes should be managed right from the bidding stag