Special Purpose Entities in Megaprojects: Empty Boxes or Real Companies?
Michaud, & Floricel, 2001). The governance is a complex multi-level concept
that is based on the institutional theory
(Ralf, Shao, & Pemsel, 2016). One way of
looking at it is through the leases of contracting; this perspective is grounded on
the regulative-governance dealing with
formal rules and regulations but also
encompasses other aspects of the institutional theory: in other words, normative and socio-cultural (Scott, 2013).
Under the contracting perspective,
the different project stakeholders negotiate, agree on, and perform contracts
(or other regulative instruments) in
accordance with the existing legal and
regulatory contexts. This perspective
focuses primarily on contracts, which
are enforceable mechanisms affecting
the project governance in different ways:
• They set common objectives and rules
for the contracting parties, which are a
subset of project stakeholders (Eskerod,
Huemann, & Ringhofer, 2015);
• They define the roles and responsibilities of the contracting parties;
• They allow the sharing or transfer of
some project risks; and
• They create the decision-making pro-
cess of megaprojects.
The contracting perspective also
contemplates other types of formal
instruments, such as public concessions, licenses, ownership links, financial transactions (e.g., loans), securities,
ad hoc companies, and so forth.
One of the formal governance
instruments, widely used in megaprojects, is the Special Purpose Entity or
Vehicle (SPE/SPV). A formal definition
of SPE is a key deliverable of this article.
When SPEs are in place, megaprojects
are statistically correlated with better schedule and budget performance
(Brookes & Locatelli, 2015; Brookes,
Locatelli, & Mikic, 2015).
SPEs are important for megaproj-
ects for three main reasons. First,
because they play a relevant role in
their governance; second, because SPEs
are positively correlated with megapro-
ject delivery time and cost (Brookes &
Locatelli, 2015; Brookes et al., 2015);
and third, because SPEs are widely used
in megaproject contracting; (Megapro-
ject Cost Action, 2014) in approximately
50% of cases they are used to regroup
the critical megaproject stakeholders;
in other words, the client, government,
and the main contractor.
In the project management literature,
it is difficult to get a clear picture of what
an SPE is and what it does. Typically,
the term SPE is mentioned in the field of
project financing and project partnering
or a combination of these, such as the
Public Private Partnership (PPP), Private
Financing Initiative (PFI), and so forth.
Project management researchers have
never focused expressively on SPEs;
conversely, other knowledge domains
have specifically addressed the theme of
SPEs—the most important are the legal
and financial domains.
Looking at the different knowledge
domains, there is neither a single nor
widely accepted definition of SPE (Basel
Committee on Banking Supervision
[BCBS], 2009). SPEs can have several
purposes, ranging from fiscal optimiza-
tion to the construction of infrastructure
megaprojects. SPEs can be either mail-
box companies (i.e., intangible orga-
nizations without people or offices) or
large organizations involving hundreds
of people. In the past, this ambiguity has
caused major problems, including:
• Lack of transparency: In some coun-
tries, for example, SPEs are not reported
on the balance sheet or other official
corporate documents (Schwarcz, 2006;
United Nations Economic Commission
for Europe [UNECE], 2011);
• Tax optimization: Sometimes SPEs are
constituted in low fiscal jurisdictions
while their operations (if existing)
take place elsewhere (UNECE, 2011).
The ambiguity in the definition of SPEs
enables companies to take advantage
of “gray areas” (BCBS, 2009; Larson,
• Ineffective policies: SPEs are difficult
to regulate and traditionally occupy a
de-regulated field. Several scandals and
crises have originated from the misuse
of SPEs (e.g., the Enron bankruptcy,
the 2008 subprime crisis, and so forth)
prompting legislators to issue more
appropriate laws (Smith, 2011).
As a result, the SPE is a topic that
has attracted the attention of decision
makers, policymakers, and academics,
specifically in the project management
field where explicit knowledge on the
topic is very limited and where SPEs
can play an important role in determining the governance of megaprojects.
This research has laid the foundations for further study on the topic
by answering the following research
• RQ1: What is an SPE?
• RQ2: Which types of SPEs exist?
• RQ3: Why are SPEs used in megaprojects?
The research presents four main
outcomes to address these questions:
1. Definitions of SPEs (addresses RQ1);
2. Typology of existing SPEs (addresses
3. Comparison of existing SPEs (addresses
4. Descriptions of SPE functions in mega-projects (addresses RQ3).
The research challenge lies on the multi-disciplinary nature of the SPE topic, specifically with respect to the first research
question. For example, the legal, financial, and project management domains
conceive the SPEs in different ways and
their technical jargon results are quite
fragmented. To overcome these challenges, the research is based on an extensive literature review (Saunders, Lewis, &
Thornhill, 2015). Consistent with Cooper
(1982) and Gruber (1993), the review consists of six main phases: problem formulation, data collection, data evaluation,
analysis and interpretation, and public
presentation, as presented in Figure 1.