Risk Allocation in Public-Private Partnership Infrastructure Projects: Comparative Study
Publication: Journal of Infrastructure Systems
Volume 16, Issue 4
Abstract
It is important for the public and private sectors to establish effective risk allocation strategies for public-private partnership (PPP) projects in order to achieve a more efficient process of contract negotiation and reduce the occurrence of dispute during the concession period. This paper aims first to identify the preferred risk allocation in PPP projects of mainland China and the Hong Kong Special Administrative Region (referred to as China and Hong Kong from here onward) and then to compare these preferences to those in the U.K. and Greece by a questionnaire survey based on the same risk register. The results in China and Hong Kong show that the public sector preferred to retain most political, legal, and social risks, and share most microlevel risks and force majeure risk; while the majority of mesolevel risks were preferred to be allocated to the private sector. The comparative analyses of risk allocation preference among these four countries/jurisdictions indicate that the public sector in the U.K. was most able to transfer the PPP risks to the private sector, followed by Greece, Hong Kong, and China. Respondents from Greece exhibited the greatest degree of support for the public sector to retain the macrolevel risks. All respondents agreed that private investors should take a more active role in managing the mesolevel risks. Respondents from China and Hong Kong considered that majority of the microlevel risks should be shared equally between the public and private sectors, while respondents from Greece indicated that the private sector should take a more active role in managing the microlevel risks. The comparative study provides international investors a better understanding of risk preferences in different countries/jurisdictions so that they could adjust their strategies according to the specific situation and achieve better value for money in running their PPP projects.
Get full access to this article
View all available purchase options and get full access to this article.
Acknowledgments
The work described in this paper was fully supported by a joint grant from the Research Grants Council of the Hong Kong Special Administrative Region, China (RGC Project No. UNSPECIFIEDN_PolyU5114/05E) and the National Natural Science Foundation of China (Project No. NNSFC70731160634). Sincere thanks go to Dr. Bing Li and Professor Akintola Akintoye for permitting the research team to adapt their survey questionnaire template. Special gratitude is also extended to those industrial practitioners from both China and Hong Kong, who have kindly participated in the questionnaire survey reported in this paper from October 2007 to December 2007. This paper forms part of the research project entitled “Developing a Best Practice Framework for Implementing Public Private Partnerships in Hong Kong,” from which other deliverables have been produced with different objectives/scope but sharing common background and methodology. The writers also wish to acknowledge the contributions of other team members including Dr. Patrick T.I. Lam, Dr. Daniel W.M. Chan, and Dr. Esther Cheung.
References
Abednego, M. P., and Ogunlana, S. O. (2006). “Good project governance for proper risk allocation in public-private partnerships in Indonesia.” Int. J. Proj. Manage., 24(7), 622–634.
Chen, C., and Doloi, H. (2008). “BOT application in China: Driving and impeding factors.” Int. J. Proj. Manage., 26(4), 388–398.
Chinese Government’s Official Web Portal. (2008). “China’s 4 trillion yuan stimulus to boost economy, domestic demand.” ⟨http://www.gov.cn/english/2008-11/09/content_1143763.htm⟩ (Nov. 25, 2008).
Cooper, D. F., Grey, S., Raymond, G., and Walker, P. (2005). Project risk management guidelines: Managing risk in large projects and complex procurements, Wiley, Chichester, U.K.
Efficiency Unit, Hong Kong SAR. (2008). An introductory guide to public private partnerships (PPPs), 2nd Ed., Efficiency Unit, Hong Kong, China.
European Commission. (2003). Guidelines for successful public-private partnerships: Version 1, European Commission, Brussels.
Grimsey, D., and Lewis, M. K. (2002). “Evaluating the risks of public private partnerships for infrastructure projects.” Int. J. Proj. Manage., 20(2), 107–118.
Hong Kong Observatory. (2009). “Climate of Hong Kong.” ⟨http://www.weather.gov.hk/cis/climahk_e.htm⟩ (Aug. 21, 2009).
Jin, X. H., and Doloi, H. (2008). “Interpreting risk allocation mechanism in public-private partnership projects: An empirical study in a transaction cost economics perspective.” Constr. Manage. Econom., 26(7), 707–721.
Ke, Y. J., Zhao, X. B., Wang, Y. Y., and Wang, S. Q. (2009). “SWOT analysis of domestic private enterprises in developing infrastructure projects in China.” J. Finan. Mange. Property Constr., 14(2), 152–170.
Lam, K. C., Wang, D., Lee, P. T. K., and Tsang, Y. T. (2007). “Modeling risk allocation decision in construction contracts.” Int. J. Proj. Manage., 25(5), 485–493.
Li, B., Akintoye, A., Edwards, P. J., and Hardcastle, C. (2005). “The allocation of risk in PPP/PFI construction projects in the UK.” Int. J. Proj. Manage., 23(1), 25–35.
Medda, F. (2007). “A game theory approach for the allocation of risks in transport public private partnerships.” Int. J. Proj. Manage., 25(3), 213–218.
National Council for Public-Private Partnerships, USA (2009). “How PPPs work—Public private partnerships defined.” ⟨http://www.ncppp.org/howpart/index.shtml⟩ (Aug. 26, 2009).
National Development and Reform Commission. (2009). “More information about 4 trillion RMB stimulus plan (in Chinese).” ⟨http://www.ndrc.gov.cn/xwfb/t20090309_265095.htm⟩ (May 13, 2009).
Ng, A., and Loosemore, M. (2007). “Risk allocation in the private provision of public infrastructure.” Int. J. Proj. Manage., 25(1), 66–76.
Ng, S. T., and Wong, Y. M. W. (2006). “Adopting non-privately funded public-private partnerships in maintenance projects a case study in Hong Kong.” Eng., Constr., Archit. Manage., 13(2), 186–200.
Roumboutsos, A., and Anagnostopoulos, K. P. (2008). “Public-private partnership projects in Greece: Risk ranking and preferred risk allocation.” Constr. Manage. Econom., 26(7), 751–763.
Sachs, T., Tiong, R. L. K., and Wang, S. Q. (2007). “Analysis of political risks and opportunities in public private partnerships (PPP) in China and selected Asian Countries—Survey results.” Chin. Mgmt. Studies, 1(2), 126–148.
Shen, J. Y., Wang, S. Q., and Qiang, M. S. (2005). “Political risks and sovereign in Chinese BOT/PPP projects: A case study.” Chin. Businessman, Invest. Finance, 1, 50–53 (in Chinese).
Zou, P. X. W., Zhang, G., and Wang, J. (2007). “Understanding the key risks in construction projects in China.” Int. J. Proj. Manage., 25(6), 601–614.
Information & Authors
Information
Published In
Journal of Infrastructure Systems
Volume 16 • Issue 4 • December 2010
Pages: 343 - 351
Copyright
© 2010 ASCE.
History
Received: Aug 31, 2009
Accepted: Apr 12, 2010
Published online: Apr 14, 2010
Published in print: Dec 2010
Authors
Metrics & Citations
Metrics
Citations
Download citation
If you have the appropriate software installed, you can download article citation data to the citation manager of your choice. Simply select your manager software from the list below and click Download.