Member-only story

Mastering the Risky Business of Public-Private Partnerships in Infrastructure

Diego Blair

·18.2k Followers· Follow

Published in Mastering The Risky Business Of Public Private Partnerships In Infrastructure (Departmental Papers)

4 min read

36 View Claps

5 Respond

Save

Listen

Public-private partnerships (PPPs) have become increasingly popular as a means to finance and deliver infrastructure projects. PPPs are long-term contracts between a government entity and a private sector consortium that share the risks and rewards of a project. The private sector consortium typically designs, builds, finances, and operates the project, while the government entity provides regulatory oversight and may also contribute financial support.

PPPs can offer several advantages over traditional public procurement methods. For example, PPPs can:

Mastering the Risky Business of Public-Private Partnerships in Infrastructure (Departmental Papers)

by Gosho Aoyama

5 out of 5

Language	:	English
File size	:	2112 KB
Text-to-Speech	:	Enabled
Screen Reader	:	Supported
Enhanced typesetting	:	Enabled
Word Wise	:	Enabled
Print length	:	81 pages

Accelerate project delivery
Reduce project costs
Improve project quality
Transfer risk to the private sector
Generate innovation

However, PPPs are also complex and risky. The following are some of the key risks involved in PPPs:

Financial risk: The private sector consortium may not be able to secure the necessary financing to complete the project, or may face unexpected cost overruns. This can lead to project delays, cost increases, or even project failure.
Construction risk: The private sector consortium may not be able to complete the project on time or within budget. This can lead to project delays, cost increases, or even project failure.
Operational risk: The private sector consortium may not be able to operate the project efficiently or effectively. This can lead to reduced service quality, increased costs, or even project failure.
Regulatory risk: The government entity may change the regulatory framework governing the project, which can impact the project's profitability and viability.
Political risk: The government entity may change its political priorities, which can impact the project's profitability and viability.

Given the risks involved, it is essential for both the public and private sectors to carefully consider the potential risks and rewards of a PPP before entering into a contract. The following are some of the key factors that should be considered when evaluating a PPP:

The need for the project: Is the project necessary and will it provide value for money?
The feasibility of the project: Is the project technically and financially feasible?
The risks involved in the project: What are the potential risks involved in the project and how can they be mitigated?
The allocation of risk between the public and private sectors: How will the risks be allocated between the public and private sectors?
The governance arrangements for the project: How will the project be governed and how will disputes be resolved?

PPPs can be a valuable tool for financing and delivering infrastructure projects. However, it is essential for both the public and private sectors to understand the potential risks and rewards involved before entering into a contract. By carefully considering the factors discussed above, both the public and private sectors can increase the likelihood of a successful PPP.

Mastering the Risky Business of Public-Private Partnerships in Infrastructure (Departmental Papers)

by Gosho Aoyama

5 out of 5