Investigating Financial Risks Associated with Public–Private Partnerships for Transportation Project Delivery
Publication: Construction Research Congress 2022
ABSTRACT
Public–Private Partnerships (PPP) provide an avenue to deliver transportation infrastructure projects when public funding is limited. The financial mechanism is a significant component of PPP projects due to the infusion of private investment into public projects. The literature on PPP and its development is substantial, whereas funding and financial assessment has received less attention and examination. The research presented in this paper was an investigation of the financial risks in PPP projects through a literature review, survey, and follow-up interviews. Financial risks associated with PPP projects include inappropriate financial structure, tedious determination of private entity creditworthiness, high-procurement costs, operation and maintenance costs inaccurately estimated, risk of capital renewal cost due to inaccurate estimates, incorrectly predicting key performance indicators, inability to sustain a revenue stream during the concession period, intervention of the public entity in cost predictions, and inefficient revenue risk sharing mechanisms. The practical application of this study is valuable to both contractors considering PPP investment, and owners/public entities mitigating risk associated with contractor tendering. By identifying these risks, construction companies are able to anticipate financial risks for PPP projects to strategize remedial actions.
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Construction Research Congress 2022
Pages: 139 - 148
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Published online: Mar 7, 2022
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