A Proposal for Risk Allocation in Social Infrastructure Projects Applying PPP in Colombia

Abstract

The public private partnership (PPP) is actually one of the most important procurement mechanisms of project development. The developed countries have implemented this method for delivering infrastructure projects in a variety of sectors: transportation, telecommunications, power, water, sanitation, health, education, and correction facilities among others. Despite the positive international experience, some of the developing countries only have implemented PPP as a delivery method for construction transportation, telecommunications and power infrastructure. These countries have not yet started to use the PPP mechanism for social infrastructure for three main reasons: a) the lack of clear legislation, b) uncertainty of risk allocation, and c) financial feasibility. This paper aims to identify the risk allocation for the development of a public school in Colombia by interviews with experts from the academia, public sector and private sector. The interview structure was designed in such way that the question sequences enable the experts demonstrate their opinions. The analysis of the quantitative data was done through a results adjustment as probabilistic distributions. The responses demonstrate that the private sector has to assume natural risks, financial risks, macroeconomic indicators risks, construction risks, and operational risks, while, the public sector has to assume the social risks, selection project risk and political risks. Finally, the legal and legislation risks, residual risk, relationship risk should be shared by both public sector and private sector. This study provides important information about the appropriate risk allocation and a risk assessment for the construction social infrastructure projects through PPP in Colombia.