Risks In Public-Private Partnerships Research Articles

Pandemic risks in PPPs: comparative analysis within developing countries

Globally, Public-private partnerships (PPPs) become a widely adopted method for advancing large-scale infrastructure projects. However, the inherent uncertainties and risks associated with these projects represent a significant managerial challenge, particularly when confronted with unforeseen events such as those triggered by COVID-19. This paper aims to identify and assess risk associated with the pandemic in PPPs in developing nations through a specific form of mixed-methods research, an embedded multiple-case study, involving the PPP programs in two developing countries in Central Asia and Latin America. Through a comprehensive analysis of risk assessment (including probability, severity, and impact) and applying Kendall’s concordance and Cronbach’s alpha tests with the SPSS 26 tool, a comparative examination of these risks between the two countries is conducted. Complementary, the embedded cases were analyzed through the triangulation of project reports, governmental websites, SPV’s websites, and interviews. The findings reveal variations in risk perception and priorities, with less mature PPP programs displaying higher risk aversion and concerns regarding project disruptions; and more developed programs seeking to address short-term liquidity challenges. Risk management strategies are proposed for PPP decision-makers to face unforeseen events more effectively.

Pricing of Credit Default Swaps from the Perspective of Credit Enhancement in PPP Projects

The difficulty in financing has become the primary obstacle in the process of promoting a public–private partnership (PPP). Asset securitization is a financial model that can exchange the predictable cash flow of illiquid PPP project assets with the current cash flow, and credit enhancement is crucial in this process. Different from the traditional external credit enhancement of PPP projects based on government guarantees, this paper introduces an innovative credit risk management tool, i.e., credit default swaps (CDS), into the process of asset securitization in the PPP model. In order to avoid opportunistic behavior caused by information asymmetry in the process of financial product transaction, a CDS trading contract between PPP project investors and risk management institutions based on the principal–agent theory and a flexible CDS pricing model is proposed. Through a demonstration case of the Leshan to Rongjiang Expressway in China, the volatility correlation among CDS contract default probability, pricing, and related factors, such as default limits, operation period, compensation amount, project investment return, investment return volatility, and PPP project investors’ expected inputs, is obtained. The study shows that (1) appropriate CDS pricing helps to generate investors’ high expected inputs and diligence with controls; (2) there is a positive correlation between the change of default limit and compensation amount, and the set value of default limit should not be too high, otherwise it may induce the increase of default probability; and (3) based on the high return on assets and moderate asset volatility of PPP projects, the probability of default of CDS contracts is low. The innovative financial mechanism developed by the principal–agent theory could enrich the credit enhancement methods in asset securities of PPP projects.

Risk resources management influence on public–private partnership risk management in construction industry. Confirmatory factor analysis approach

Purpose Construction organisations cannot underestimate the improvement in public–private partnership (PPP) projects’ implementation. At the same time, construction organisations cannot overlook the risk arising from engaging in PPP construction projects. Hence, this study aims to establish the influence of risk resource management (RRM) in managing PPP risk in the construction industry in Ghana. Design/methodology/approach The researchers adopted qualitative and quantitative research methods to achieve the aim of the study, in which Delphi questions and a close-ended questionnaire were developed. A total of 650 construction specialists, including procurement officers, consultants, project managers, quantity surveyors, site engineers and planning officers were chosen using random and purposive sampling techniques. Recovered data were analysed using descriptive statistics and confirmatory factor analysis (CFA). The CFA maximum likelihood estimation extractor compresses 19 variables into 3 pattern matrices. Findings The results of the study revealed three factors that measure RRM in Ghana’s PPP construction industry, including financial resource management which was influenced by communicating the budget to project team members and project partners understanding the budget, and material resource management which was influenced by the provision of materials transportation and provision of delivery programs and labour resource management which was impacted by a commitment to pay social security and taxes and provision of good salaries, to address RRM in PPP construction organisations. Research limitations/implications To incessantly improve the PPP risk management (RM) in construction through RRM, there should be a strong liaison between the universities, government agencies and the construction industry, and such collaboration will assist the industry to obtain first-hand information regarding the study findings and how they can be implemented to help the development of RM in the construction industry. This study is limited to Ghana and CFA and further study should explore structural equation model to determine the structure and measurement model of the risk resource variables. Originality/value The study may be valuable to industry stakeholders looking for new approaches to improve RM in their construction activities, particularly in PPP projects. Also, to assist reduce PPP risk, construction companies should use RRM in their organisations.

A method for the ontology-based risk management of PPP construction projects

PurposeWith the increasing complexity of public–private partnership (PPP) projects, the amount of data generated during the construction process is massive. This paper aims to develop a new information management method to cope with the risk problems involved in dealing with such data, based on domain ontologies of the construction industry, to help manage PPP risks, share and reuse risk knowledge.Design/methodology/approachRisk knowledge concepts are acquired and summarized through PPP failure cases and an extensive literature review to establish a domain framework for risk knowledge using ontology technology to help manage PPP risks.FindingsThe results indicate that the risk ontology is capable of capturing key concepts and relationships involved in managing PPP risks and can be used to facilitate knowledge reuse and storage beneficial to risk management.Research limitations/implicationsThe classes in the risk knowledge ontology model constructed in this research do not yet cover all the information in PPP project risks and need to be further extended. Moreover, only the framework and basic methods needed are developed, while the construction of a working ontology model and the relationship between implicit and explicit knowledge is a complicated process that requires repeated modifications and evaluations before it can be implemented.Practical implicationsThe ontology provides a basis for turning PPP risk information into risk knowledge to allow the effective sharing and communication of project risks between different project stakeholders. It can also have the potential to help reduce the dependence on subjectivity by mining, using and storing tacit knowledge in the risk management process.Originality/valueThe apparent suitability of the nine classes of PPP risk knowledge (project model, risk type, risk occurrence stage, risk source, risk consequence, risk likelihood, risk carrier, risk management measures and risk case) is identified, and the proposed construction method and steps for a complete domain ontology for PPP risk management are unique. A combination of criteria- and task-based evaluations is also developed for assessing the PPP risk ontology for the first time.

Risk Identification, Assessment, and Allocation in PPP Projects: A Systematic Review

Public private partnerships (PPPs) have gained widespread adoption as an innovative way of procuring public infrastructure projects over the last two decades. Risk identification, assessment, and allocation have received considerable attention from researchers due to the risk heavy nature of PPP projects. Adoption of PPPs has triggered a sudden increase in research interest in the area in recent years. This study attempts to provide an updated systematic review of literature related to risks in PPPs using a PRISMA flowchart. The results of the study offer some valuable insights into the future and current state of research. The study found that the focus of research on PPPs has shifted from an overall risk identification and assessment approach to individual risk analysis. Moreover, this research trend is on the rise in developing countries, and that quantitative methods for risk management in PPP research and qualitative methods in practice are preferred. In developed economies, due to negative public sentiments, transparency concerns, and arguments of value for money not being achieved, PPPs are becoming less popular. For these reasons a shift to availability-based payment mechanisms such as in Design-Build-Finance-Maintain (DBFM) from traditional revenue-based mechanisms as in Build-Operate-Transfer (BOT) has been observed. These shifts in research trends and practice offer researchers future opportunities to investigate these relatively newer approaches.

The Risks of Construction PPP Projects in Palestine

Many developing nations, such as Palestine, implemented PPP (public-private partnership) to fulfill the increasing needs for public services and facilities. Nonetheless, PPP projects have numerous risks which influence each other and can cause project failures. Unfortunately, current studies related to the PPP risk association have not provided adequate details. This paper tries to fill the literature gap by proposing a practical approach in analyzing the relationship among PPP risks. First, the research identifies risk for PPP projects in the Palestinian construction industry by integrating the interviews and literature review. Next, this study reflects the associations among the risks and reveals the failure instruments of PPP projects using FISM (fuzzy interpretative structural modeling). Besides, this paper uses MICMAC (matrix impact cross-reference multiplication applied to a classification) and FISM method to discover and finalized the 19 crucial risk elements. The MICMAC-FISM approach reckons the fuzzy of the PPP risk association and enhances upon previously published works.

Critical Risks Inherent to the Transfer Phase of Public–Private Partnership Water Projects in China

Public–private partnership (PPP) infrastructure projects progress through separate phases, with each phase subject to unique risks, thereby requiring a phase-based strategy for managing risks. To date, most research on PPP risk has emphasized phases, with an obvious neglect of the final, transfer phase (TP) of PPP projects, in which the project ownership reverts to government. This study identified and evaluated critical risk categories of the TP, using China’s PPP water sector as the context of analysis. A two-stage approach was adopted, including both qualitative and quantitative research methods. Seven critical transfer risk categories (CTRCs) were identified, namely overhaul risks, contract risks, posttransfer operation risks, residual value risks, political risks, information risks, and succeeding operator risks, of which three are unique to the TP. Expert recommendations were presented for the facilitation of a smooth transfer of water PPPs in China. The findings of this study contribute to the body of knowledge in PPP risk management, and the specialized research approach employed may be utilized in similar exploratory studies.

Review of risk management studies in public-private partnerships: a scientometric analysis

This paper reviews the trend of research studies on risk management in public-private partnerships (PPP). Bibliometric data of 1730 publications were retrieved from Scopus using selected keywords between 1989 and 2019. The VOS viewer software was then used to conduct a scientometric analysis of the normative literature. The review outcomes show that research on PPP risk management has generally increased over the last decades, however, a significant increase in publications was realized in 2005. This reinforces assertions that risk management is an essential issue in PPP practice globally. Further, the three most productive countries of PPP risk management research are the U.S., China and, the U.K. Lastly, it was found that majority of the PPP risk management studies have focused on only four key areas of the conventional risk management framework process, and this includes risk identification and assessment, risk allocation/sharing, risk analytical models and techniques, and risk mitigation. Other areas including risk treatment, risk monitoring and review have not been properly explored which makes the PPP risk management framework process inconclusive. The present study contributes to PPP knowledge by providing a general overview of risk management in PPP, thereby creating a solid platform for future research efforts in this critical domain.

A paradigm shift in risk management in public–private partnership arrangements

Abstract This research sought to determine how public–private partnership (PPP) arrangements can more efficiently address risk management issues using the example of Mozambique as a case study. Analyses of 15 interviews in this country were conducted using the Gioia methodology. The results indicate that integrating key risk indicators into PPP contracts can improve risk management. These measures have been widely used in company risk management. The indicators can serve as monitoring, reviewing and supervising tools, allowing the integration of external factors into PPP contracts at the right time, which is hard to predict when the contracts are signed. Key risk indicators can capture megatrends, track risk evolution and develop future scenarios throughout the entire lifecycle of contracts, preventing conflicts between partners, contract renegotiations or early contract terminations by facilitating an improved understanding of contracts' current realities. The findings suggest that these measures should be applied by PPP units. The proposed approach encourages originality and empirical research-based improvements of PPP risk management frameworks and provides guidelines for future studies.

Risk Assessment of Urban Rail Transit Project Using Interpretative Structural Modelling: Evidence from China

Public-private partnership (PPP) projects require comprehensive risk assessment and management, including Urban Rail Transit (URT). A more effective risk management can benefit from an accurate understanding of the two-way influence of PPP project risk factors. This paper uses the content analysis method to filter out, compare, and analyze PPP-related literature; 12 categories of 22 PPP risk factors are extracted and identified, and the possible correlations between these risk factors are judged preliminarily. With the knowledge and advice provided by PPP experts, the initial risk relationships are adjusted and supplemented, which then help to determine a reasonable logical relationship among risk factors. The logical relationship helps analyze the risk factors based on the ISM model analysis method and builds a hierarchical structure relationship of risk factors including 6 levels. Finally, the direct, intermediate, and autonomous factors that lead to problems or failures in PPP projects are analyzed which explains in detail the paths of risk transmission and risk prevention measures of PPP companies operating URT. It lays a foundation for PPP project companies operating URT to recognize, manage, and control risks in a targeted and systematic manner.

Public–Private Partnership Risks in Conflict Zones and Solutions: Case Study for Afghanistan

AbstractInsufficient studies on public–private partnership (PPP) risks in conflict zones, and thus lack of knowledge to provide effective and feasible solutions to these risks, are the major reason...

Ethical Risks in Public-Private Partnerships: The Case of Lahore Waste Management Company

The world is coming up with new solutions to old problems in order to improve efficiency and effectiveness in public service delivery. Public-Private Partnership (PPP) is a relatively new form of participatory governance. Th is approach is linked with New Public Management (NPM) and, since its inception, the private sector has taken over the entire world despite in-congruence and incompatibility in indigenous values and cultures. PPP is also claimed to be the best solution in terms of service delivery; however, its effectiveness is yet to be achieved. Th e purpose of this study is to find the effectiveness of the PPP mode of governance. Th is study is qualitative in nature and has taken one entity based on PPP as a case, i.e. Lahore Waste Management Company (LWMC), in order to study the impact of this solution to all, the ills of public service delivery. Fourteen officials were interviewed in this study of LWMC (a quasi-governmental institution) and its private partners. Findings suggest that this PPP mode has major ethical risks in the form of lack of transparency in awarding contracts, equity-efficiency trade-off , overall conflict of philosophy of public and private sector, low professionalism, value for money (compromise on cost and quality), and weak accountability mechanisms.

Sustainability evaluation of public–private partnership microgrid considering uncertainty and risk preference

Abstract Making sustainability evaluation of public–private partnership (PPP) microgrid can not only produce a great impact on distributed generation but also be related to the planning and operation of distribution network. In consideration of the identification of key influence factors (KIFs) about the sustainability of PPP microgrid, information loss, and risk attitude of decision-makers (DMs), an integrated decision framework is proposed to evaluate PPP microgrid from the perspective of sustainability. Firstly, a three-stage method based on interval valued triangular fuzzy (IVTF)-Delph is developed to identify and select KIFs, and a sustainable evaluation criteria system is established from the economic aspect, social aspect, environmental aspect, technical aspect, and managerial aspect, respectively. Secondly, DMs’ weights are determined based on the IVTF-TOPSIS method, and combined weights of criteria are determined based on IVTF-AHP and IVTF-entropy. Thirdly, an S-shaped utility function under IVTF environment is utilized to get the ranking of PPP microgrids. Moreover, a case study demonstrates that the proposed sustainability evaluation framework is very suitable for PPP microgrid. Finally, sensitivity analysis shows that the utility values are influenced by risk preference and criterion weight fluctuation.

Assessing and allocating the financial viability risk factors in public-private partnership wastewater treatment plant projects

PurposeThis research investigates the financial viability risk factors that threaten the private investor's economic scheme in the public private partnership (PPP) wastewater treatment plant (WWTP) projects in Egypt. The aims of this study are to: (1) illustrate and cluster the financial viability risk factors in accordance with the PPP WWTP projects' nature, (2) assess the risk factors' criticality degrees according to their severity and frequency levels of the financial viability, and (3) pinpoint the suited allocation of the financial viability risk factors between the public and private parties.Design/methodology/approachRelying on the previous analysts' endeavors, the questionnaire method, the fuzzy synthetic evaluation approach and the hypothetical normal distribution curve model; the severity, frequency, criticality and allocation preference of 32 financial viability risk factors were assessed from 12 Egyptian PPP experts.FindingsThe data analysis yielded that foreign exchange risk, currency risk/inflation, license risk, construction cost-overrun and late site handover are the key factors in arising the financial viability risk issue in the PPP WWTP projects. Considering the discussion of these key risks, the study summarized that the financial viability's key risk factors are notably be affected by the economic, political and administrative circumstances of the host county. Additionally, the inflation lesion was found to be the core reason of most of the key risk factors.Originality/valueThis research originality stems from its contribution to address the gab in the PPP risk assessment literature of the concessionaire's financial viability in the WWTP projects in a country of developing economy as Egypt. This, first, enriches the scholarly based knowledge of the PPP projects' risk analysts of the developing countries. Accordingly, it moves the current PPP risk assessment research further to deeply apprehend these markets' risks. Second, it equips the policymakers in the public and private sectors of such projects with a map that clarifies their assigned risk factors and the responsibilities that each party should bear to generate a mutual stable investment environment for achieving their aims successfully. This, indeed, paves the way for more private investments to be involved in the developing markets' PPP projects with a profitable satisfactory level for the private concessionaire. In the same vein, more WWTP projects, which are highly needed for the public sector and its people, are executed.

Stakeholder-Associated Risks and Their Interactions in PPP Projects: Social Network Analysis of a Water Purification and Sewage Treatment Project in China

As a result of complex contractual relationships, multiple stakeholders with different interests are involved in public-private partnership (PPP) projects. Compared to traditional models, PPP projects have more uncertainty. This study integrated stakeholders and risk factors in PPP projects from a network perspective to better determine how to control risks. Using social network analysis (SNA), a case study was conducted to identify the critical risk factors, and mitigation actions are proposed. The results indicated that, compared to other stakeholders, local governments play the most important role in PPP projects. Managers should therefore pay more attention to political and legal risk factors and develop reasonable risk-sharing plans. This study expands PPP risk research from the individual level to the network level and provides a visualized, innovative research paradigm for PPP risk analysis. The results can also be used by project managers for decision-making, risk management, and other processes, thus helping to achieve the sustainable management of PPP projects.

Impact of Endogenous Risk Factors on Risk Cost in PPP Projects in Saudi Arabia

The formation of the Public-Private Partnership (PPP) contracts is based on the grounds that the construction, progress, operation, and investment of a project must be allocated to a private organization under a contract. The risks associated with PPP projects are usually associated with resource improvement and development as well as the long-term operation of the project. It is known that cost and time overruns are among the obvious risks faced by a project during the development phase. Cost and time overruns are major sources of monetary risk. The risk and its impact may vary at different phases during the life cycle of a PPP project. In traditional procurement, all of the monetary risks are covered by the public sector. Most of the projects delivered under traditional procurement involve a price confirmation to indicate standard cost risks. This paper aims to investigate the impact of endogenous factors on budget overrun in PPP projects in Saudi Arabia. The paper briefly illustrates the content regarding the PPP risk evaluating systems and explains the association between risk occurrences and cost overrun in the Kingdom of Saudi Arabia (KSA). The paper concludes with recommendations for future research.

A canvas model for risk assessment and performance estimation in public–private partnerships

Public-private partnership (PPP) is being widely used to meet the growing infrastructure and service demand. However, previous literature draws attention to distressed or failed PPP projects due to significant risks. In the quest for assessing risks and estimating the performance at the outset of a project, there is a need for a practical tool allowing in-depth analysis of the project conditions. This paper aims to develop a PPP Canvas which enables assessment of the project risk factors and determining the related compensation mechanisms that can be used to mitigate these risks or allocate them to the parties in a balanced way. The Canvas also helps to estimate a project performance score based on the significance coefficients determined by the Analytical Hierarchy Process. AHP results show that stability of economic environment, political support and government intervention are the most important risk factors in the local context. AHP can be repeated for each specific PPP project, as part of the PPP Canvas process, to foster discussion and analysis of the risks and compensation mechanisms across different geographical locations and PPP project types. The paper adds a new dimension to PPP risk assessment by making use of the Business Model Canvas approach and the inclusion of contractual compensation and penalty mechanisms. As the stakeholders become more informed of the project conditions and the risks involved, they can make better decisions throughout the project life-cycle and can benefit from the identified compensation mechanisms in contract drafting.

Public–private partnerships: implications from policy changes for practice in managing risks

PurposeThis paper investigates the policy changes made towards infrastructure public–private partnerships (PPPs). The purpose of this study is to empirically identify the policy risks associated with the development of PPPs and to assess their impacts on the projects.Design/methodology/approachA case study of the policy changes that have been implemented for PPPs in China over the past seven years has been undertaken and is presented in this study. The causal loop diagrams are applied to assess and illustrate the potential impacts of the risks as a result of such changes on PPPs.FindingsA sequence of the policy risks, which relate to PPP risk allocation, contract management and implementation, payment and abatement mechanisms and financing, has been identified. It is also found that the identified risks will generate significant but negative impacts on PPPs, leading to an ineffective project delivery, low revenue, poor service quality and even contract breach.Practical implicationsThis research provides the private-sector entities that will embark on PPPs with an insight into managing and controlling policy risks over the project's lifecycle.Originality/valuePPPs have been critical for infrastructure development worldwide. Nevertheless, they have been a controversy, as many of them were subjected to poor outputs. Consequently, a variety of political mechanisms has been implemented to enhance the governance for PPPs. Policy can bring not only benefits but also risks and, however, policy risks of PPPs with a particular assessment for their potential impacts have received limited attention. Therefore, the study presented in this paper will contribute to the identification and assessment of policy risks within the context of PPPs.

Risks in Public–Private Partnerships: A Systematic Literature Review of Risk Factors, Their Impact and Risk Mitigation Strategies

Public–private partnerships (PPPs) are a popular way to form synergies between public and private partners in order to overcome modern challenges and develop new opportunities. However, recent research suggests that PPPs entail more risks than other projects. In this systematic literature review, we analyze 159 articles published in international journals and identify eight major risk factors in PPPs. We integrate our results into a risk management framework and examine how the risk factors potentially impact PPPs before summarizing risk mitigation strategies. Our findings offer a cross-sectoral perspective and bridge the gap between research and practical implementation. By developing a novel conceptual model we advance the understanding of risks in PPPs and contribute to the theoretical foundations.

Государственно-частное партнерство как механизм привлечения инфраструктурных инвестиций: проблемы внедрения и снижение рисков

The article discusses the problem of attracting infrastructure investments which is acute for every region of Russia. According to the authors of the article, the state participation is not enough to implement major infrastructure projects. It is necessary to attract significant financial resources and to ensure the implementation of relevant national projects. The article reveals the mechanism for attracting infrastructure investments used throughout the world, namely, the public-private partnership (PPP). The authors analyze the constraints on the implementation of PPP in national projects, the construction of roads. Some mechanisms for reducing PPP risks are offered.