Abstract
The successful implementation of public-private partnerships (PPPs) requires the contractual obligations and rights of the public and private parties to be clearly defined. The occurrence of risks in PPPs may negatively impact the parties’ abilities to perform their obligations. Force majeure (FM) risks represent a risk category that requires delicate management as it may cause tremendous losses to the private party. However, little has been published on how these risks were defined, allocated, and managed in PPPs. This paper investigates these issues through a case study approach that analyzes the agreements of five PPP transportation projects in British Columbia through content analysis. The findings show that not all FM events are dealt with as FM risks; only the most severe are called eligible FM (EFM) risks. These risks provide compensation events that relieve the parties from their obligations, allow termination of contracts, and provide for compensating the balance of the private debt, equity, and labor payments. Non-EFM events provide for continuation and compensation for the expenditure above the maximum insurance coverage. If the expenditure and restoration time exceed particular thresholds, termination may occur. The analysis should assist the PPPs on how to better manage the FM risks.
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