Risks and risk treatments in public private partnership projects

Public Private Partnership (PPP)/Private Finance Initiative (PFI) projects have been increasingly used in the public sector services and infrastructure provisions in the UK since the last decade. However, there are many risks and uncertainties associated with PPP projects. Risk management is a widely recognized technique in helping decision making and project management. The experiences of private financed projects across the world have suggested that the risks within PPPs are more complicated under the innovative procurement arrangement. The hierarchical structure - main, principal and individual risk - had been used to identify and organize the risk factors within PPP projects. The three main risk categories have been highlighted as macro, meso and micro. Forty-six risk factors associated PPP projects have been identified from literature reviews. This study was conducted through a questionnaire survey to produce criticality of risk factors for PPP projects, and options for risk treatment techniques on risk factor basis. Statistic analyses were carried out using descriptive analysis (mean value analysis and ranking) and informative analysis using analysis of variance (ANOVA). Results show that three major categories of risk have different impacts on PPP projects. Most of the critical risks belong to the meso (project) level. Micro risk has minor to moderate impact on PPP projects, while the macro level risks range in a wider spectrum. The results also show that the public and private sectors have differential opinions of the risk factors. Results also indicate that among four general risk treatment measures, risk avoidance and risk reduction are seldom used compared with risk retention and risk transfer. Risk retention of the risks assigned to both public and private sectors is the preferred measure for dealing with the less critical risks, while the private sector prefers to transfer the critical risk to third parties.