Exploring Risks In Public-Private Partnership Projects: A Literature Review

Background

The coming years will see an escalation in the different infrastructural projects as well as developmental projects in both the developing and the developed countries. The developing countries especially are more inclined to large scale infrastructural projects that will directly amount to a sharp increase in the GDP of the country. The project will address the risks that are associated with the delivery of the Public-private Partnership Projects. It is necessary to have a clear and compact idea about the following term which in short is termed as PPP. The following model is a funding model where a particular infrastructure project is carried out with both the technical and financial involvement of the public bodies and the private players (Neuman 2016). The public bodies in this case are the government while the private bodies in this case are the private organizations or the private investors.

The significance of the particular research lies in the growing importance on the rise of the PPP projects. The increasing number of PPP projects is one of the main factors which will contribute to the construction of the research. There lies the significance of the research on this particular topic as it will throw light on the identification of risk factors in future PPP model constructions.  

The main aim of the following research is to explore the risks that are involved in the Public Private Partnership projects. This will be possible through the formulation of a solid and compact review of the related literature that is based on the given topic.

The objective of the research will be to conduct a critical analysis on the literature related to the public and private partnerships in construction projects. Apart from this the research will also synthesize the literature and provide the risks involved in such kind of projects and identify and categorize them according to their priority (Boyack Smith and Klavans 2018). The categorization can be possible by the proper analysis and discussion of the literature. 

The risks associated in a PP project can be addressed by synthesizing the elements of PPP projects. The understanding and addressing of the risks involved in a PPP project early on is utmost necessity for both the parties which are involved in the construction project. The literary review will present the different kinds of risks that are involved in such kind of projects. The main types of PPP project risks that will be discussed in the research are as follows;

• Market and Revenue Risks-This particular risk is the uncertainty in relation to the amount generated by the project. The particular kind of risks can be classified into three major divisions namely;

1. Insufficient Income from other operations-The following case sees similar kind of operations exist to request the government to give some amount of cash compensation for the different kind of deficiencies and also to extend th=e period of concession. In addition the concession providing company will have different scopes to increase the rents or adopt other kind of business strategies that might be of great help to the organization.
2. Insufficient Income from fares or tolls-The Company that operates the PPP project under Government concession may do it by means of proper concession either in cash or in kind. The government must identify and mention the different risks associated in such projects to avoid any kind of late problems (Creswell and Creswell 2017).
3. Insufficient Traffic-The contractor of the PPP project must obtain a sufficient commitment from the government in respect to the anticipated traffic levels and to negotiate a proper compensation agreement for the different kinds of deficiencies (Neuman 2016).  

• Design Risks-The particular risk relates to the problems in the design of the different infrastructural projects or the different design requirements that are stipulated for the particular project (Carbonara et al. 2015). The following can be said to be as an inherent risk in the project as it is very difficult to conclusively identify the damage done to the project site or the facility as the parameter of the damage done to the design cannot be ascertained.
• Construction Risks- The following types of risk is considered to be the most devastating and strategically the most important risk in the PPP project. This includes the like sof the design failures, construction accidents, time frame failures and many as such. The following risk can also be categorized into a number of different types. They are as follows;

1. Land Expropriation-These kinds of risks may flow to both the Government as well as the private player operating in the particular project. Both the parties must legalize the use of the construction land and work in coordination to avoid such kind of unnecessary risks.   
2. Cost Overrun and Time and quality- These is the most common type of risk as it may hamper the total plans and involve increase in the financial allocation of the project (Marczyk DeMatteo and Festinger 2017). The failure of the organization to complete the project in time will also involve in other problems like allocation problems, cost overruns and many more as such.
3. Increased Financial Costs- The increase in time period will directly result in the increase in the cost of the projects.
4. Contractual Default-The following kind of risk occurs when the concession companies may claim liquidated damages from the contractor or make a claim against the performance of the contractor and the bond and the bonding company.
5. Default of the concession company-The liquidated damages to the company involve the different types of the concession claimed in the construction of the projects.

• Operating Risk- There are risks that the companies face when the management provides maintenance and operations type of services. Apart for the dismissal of the concession of the company, these risks have a direct impact on the concession company. Some of the operating risks are performance risks, operational cost overrun, default risks and many other kind of similar risks as such.
• Financial Risks-Financial Risks can be categorized as the other major risk that is involved in the PPP projects. The financial risks are termed as high level risks because of their capability to cause damage. This kind of risks is thus always provided the highest priority. Financial risks are generally of two different types namely Exchange rate risks and Interest rate risks (Antuchevi?ien? 2016). The former directly relates to the changes in the foreign exchange valuations over the time period of the project while the latter refers to the bearing of additional costs as interest of loans taken from the banks or other financial institutions.  
• Environment Risks-The absence of proper coordination between the parties involved in the PPP project often leads to the formulation of faulty construction designs or designs which may harm the environment (Boyack Smith and Klavans 2018). Thus it is necessary to ensure the safety of the environment before the commencement of any large infrastructural project.
• Legal Risks-The legal complications related to the acquiring of lands or the legal aspects related to the construction of any infrastructural project based on a PPP design pose huge risk to the project which must be taken into consideration.

The PPP projects have high chances of getting affected by risks because of failure in;

• Organizations
• Processes
• Contribution of the government
• Skills of the employees and the management
• Measurement

The presence of such kind of factors makes these projects prone to risks of all forms. The research will thus help the managers of future projects to identify the risks involved.

The methodology part of the research will provide the detailed methods on which the research will be conducted. It proposes the ideal layout for the preparation of the detailed methodology for the following study. The methodology part of the research will derive the results of the research and also the strategies that will be used in the following research. The use of qualitative methods will be taken to complete the research.

The research will use the descriptive research design. The following research design will be chosen over the other designs just because of its capability to provide a transparent and compact analysis of the different types of theories and concepts related to the risks in PPP projects (Antuchevi?ien? 2016). The use of the descriptive research design has also a larger acceptability in the research arena than the other two designs.

The data will be generally collected by selecting different kinds of reports that can be available from websites and also from different books and journals. The following data collection method will be much easier to complete than the conventional methods of data collection through sampling and interview. Apart from this the researcher can also take the help of telephonic conversations and mail conversations to gather necessary information from construction site engineers on the risks involved in PPP projects.

According to, Boyack Smith and Klavans (2018) the reason for the selection of the qualitative methods in this particular case will be the fact that qualitative method helps in the in depth investigation of the topic and will also help in the identification of the different kinds of theories and concepts that will be helpful for meeting the objectives of the proposed research. The particular research will moreover discuss on the different problem that occurs in PPP projects and thus it needs a theoretical approach rather than a quantitative approach.

Table No 1: Time Schedule

Source: (As created by the Author)

References

Antuchevi?ien?, J., 2016. A new hybrid fuzzy cybernetic analytic network process model to identify shared risks In PPP projects.

Boyack, K.W., Smith, C. and Klavans, R., 2018. Toward predicting research proposal success. Scientometrics, 114(2), pp.449-461.

Carbonara, N., Costantino, N., Gunnigan, L. and Pellegrino, R., 2015. Risk management in motorway PPP projects: empirical-based guidelines. Transport reviews, 35(2), pp.162-182.

Creswell, J.W. and Creswell, J.D., 2017. Research design: Qualitative, quantitative, and mixed methods approaches. Sage publications.

Liu, J., Yu, X. and Cheah, C.Y.J., 2014. Evaluation of restrictive competition in PPP projects using real option approach. International journal of project management, 32(3), pp.473-481. (Liu Yu and Cheah 2014)

Marczyk, G., DeMatteo, D. and Festinger, D., 2017. Essentials of research design and methodology. John Wiley.

Neuman, W.L., 2016. Understanding research. Pearson

O’Leary, Z., 2018. Research Proposal: Little Quick Fix. SAGE.

Orcher, L.T., 2017. Conducting Research: Preparing a prelimniary research proposal. Routledge.

Osei-Kyei, R. and Chan, A.P., 2015. Review of studies on the Critical Success Factors for Public–Private Partnership (PPP) projects from 1990 to 2013. International Journal of Project Management, 33(6), pp.1335-1346.

Patten, M.L., 2016. Proposing empirical research: A guide to the fundamentals. Taylor & Francis.

Walliman, N., 2017. Research methods: The basics. Routledge.

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