Originally Posted by
Haven't a clue
So if they spent megabucks their rate of return was based on that spend. There was thus an incentive to spend as much as possible on infrastructure
This is a distressingly common approach in public expenditure, caused by academic economists coming up with commercial agreements ("to an economist, the real world is a special case ...").
You give out contracts for say road works to the "lowest bidder", that is for the one who quotes the lowest rates for the various activities. You even ask them to report their costs. But they in turn have the opposite incentive, to eat up as much cost as possible. If they are going to be allowed 10% on top of costs, 10% on a large amount is better for them than 10% on a small amount.
Heathrow, being a regulated monopoly, owned by Ferrovial, can of course give out construction work "at cost" if they wish, to construction contractor Amey, owned by Ferrovial, who would be delighted to build a little runway for £18bn, especially as three of Heathrow's directors are ex-Amey.