Abstract
Risks represent a large portion of a project’s success. This is especially important in long-term projects such as public-private partnerships (PPPs) due to their complicated nature and long duration. Risks manifest in these projects throughout the project phases and can have severe effects on them. Previous literature has studied and reported on various methods for incorporating risks long-term projects; however, there is no universal method used. Hence, this paper identifies and reviews the most commonly used methods. Four methods were identified, which are risk adjusted discount rate, uncertain parameters method, certainty equivalent method, and decoupled net present value (NPV) method. These methods were discussed and contrasted in order to show their uses for long-term projects such as PPPs. The first method was found to incorporate both risk and time in a combined method while the other methods relied on decoupling of the risk and time due to their different natures.
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