Public-Private Partnership in Infrastructure Development – An Exploratory Study of Risk

Abstract

Public-private partnership (PPP) involves private investment for the design, construction, operation and even maintenance of a public infrastructure or service project, and generates revenue by charging the users in an agreed specified period of time, or by fixed annual disbursements paid by the public agency. This model of procurement has become one of the commonly adopted procurement strategies in developed and developing countries. Therefore it is considered as the best solution for resource scarcity of infrastructure provision in developing countries like Pakistan. Owing to the complex nature, understanding of risk identification and allocation are key variables for a successful PPP implementation. Therefore, presence of effective, reliable and practical risk management system in any PPP project not only helps in the planned execution of project activities but also makes favorable and conducive atmosphere for private investors to work with confidence. Over the last two decades, Pakistan has experienced mixed taste of success and failure related with PPP construction projects. This exploratory research is an attempt to uncover the critical risks related to PPP road sector projects of Pakistan through qualitative approach based on in-depth interviews targeted to the experts and practicing professionals of PPP from both public and private parties. Financial, political and management risks are the major risks that emerged during the case study of four projects covering road and hydropower sectors. To analyse the impact/severity of these risks based on the real life example of case study projects, content analysis is used which revealed that political and management risks are severely effective in road and hydropower sectors respectively. At the end, some favorable measures are suggested which are crucial for the successful implementation of PPP in Pakistan.