Risk in Public-Private Partnerships and Critical Infrastructure

Abstract

The process risk allocation is essential for effective PPP contracts, depending on the scope of defined tasks and responsibilities between the parties in their quest to deliver public services. However, risk in critical infrastructure is sui generis risk which could not be treated contractually and transferred by the public sector to the private sector or retained by the party to an arrangement which is suited best to borne such risks.Risk in critical infrastructure, being either internal or external, is endemic to the relevant services andwhen critical infrastructure is delivered by public-private partnerships or owned by private actors, the treatment of such risk merits a third-party approach. Such third-party could be an industry in itself, such as insurance, re-insurance or hedge fund insurance bond finance, or a sector / industry approach which related to the owners/operators of the relevant infrastructure, by means of collective apportioning and mitigation of risks associated with the failure of providing services fromsuch infrastructure. The most innovative way of treating risk of critical infrastructure remains in the discretion of EU Member States, in the form of integrating costs related to risk assessment and security measurers to protect critical infrastructure into tariff arrangements of relevant services. In such manner, the enduser / consumer of services ensures and collectively insures their delivery against any type of risk which is not quantified and determined as part of corporate arrangements between the state and the private sector provider of services.