The risky business of public–private partnerships

Abstract

SYMPOSIUM Public-private partnerships (PPPs) are now a common strand of third way government policy, with better efficiency promised from the private funding of public infrastructure through the transfer of risks to private parties. This paper aims to investigate, on an empirical basis, the realities of risk transfers in PPPs and compare this experience against both the rhetoric of project proponents and the formal contract conditions. The paper outlines some conceptual frameworks underpinning PPPs and establishes the notions of risk shifting and risk sharing. The range of typical risks encountered in infrastructure projects is specially considered, and differences to traditional project delivery arrangements are articulated. Some empirical experience on the transfer of risks under PPPs is then outlined through a case study. This analysis shows the extent to which risks were shifted to the private parties as planned, or whether risks remained with government. It is argued that while commercial risks were largely well managed, governance risks were not. It is critical to understand better the nature of risk transfers in PPPs in view of the large financial implications of these deals along with long contract terms.

La Colaboración Público-Privada: capacidades públicas para la gestión del modelo desarrollado por el Servicio Público de Empleo Estatal y las Agencias Privadas de Colocación

“…Ello permite proporcionar un espacio estable e identificable que aporte seguridad jurídica al sistema y a los actores implicados. Un sistema jurídico sólido asegura la eficiencia de las operaciones de la asociación y su vinculación a otros objetivos de la política (Jamali, 2004;Hodge y Greve, 2007;Hodge, 2004). En cambio, la existencia de un marco normativo débil contribuye de forma negativa en la resolución de conflictos y debilita la estructura y los procesos de colaboración.…”

The Dedicated PPP Unit of the South African National Treasury

“…Several authors (cf. Grimsey and Lewis 2005;Gosling 2004;Hodge 2004;Burger 2000, 2001) have indicated that a successful PPP is characterised by affordability, value for money and sufficient risk transfer. These authors also discussed the interrelationship between affordability, value for money and sufficient risk transfer, as well as their prerequisites.…”

Managing trust and relationships in PPPs: some Australian experiences

“…Recently, the UK Blair government committed to 400 Private Finance Initiative (PFI) contracts (Gray, 2002). PFI has become a centrepiece of New Labour's stakeholder society (Hodge, 2004). Under PFI schemes, the private sector builds the project and raises finance in the capital markets.…”