Incorporation of sustainability considerations in PPP projects; an exploratory study of risk

Abstract

Public private partnership (PPP) has been recognized as a potential model for delivery of sustainable infrastructure. The long-duration and risk-sharing mechanisms of PPP provide a unique opportunity for fostering innovation and driving sustainable development. However, efficiency gains from these features can be materialized only through effective implementation. In PPP projects, sole reliance on the traditional project management procedures and processes limits scope of decision making to the contract duration and the contracting parties. For more informed decision-making, it is useful to align the management of large infrastructure projects with the core values of sustainability assessment focusing both short- and long-term impacts of the project and the changing project environment during its life cycle. In particular, such limitations in approach result in a rigid treatment of risk during the risk assessment of PPP projects. Therefore, the study focuses on analyzing PPP infrastructure risks in terms of their possible deterrent effect on sustainability impacts and proposing possible mitigation strategies. A triple bottom line hierarchy of sustainability indicators has been employed over which the impact of various risks is traced both quantitatively and qualitatively. The probability-impact assessment for risk has been carried out through an international survey for highway sector projects procured under PPP. Furthermore, sensitivity analysis has been carried out for measuring probabilistic risk scores of the various risk impacts over the three groups of sustainability; financial, environmental, and social. Additionally, mitigation strategies for the most sensitive risk relationships are devised with the help of experts. Human health damages indicator of environmental sustainability has the highest range of risk score. However, life cycle cost indicator of financial sustainability has the most amount of risks acting on it. For social sustainability, the socio-economic repercussions indicator has the highest value of risk score range as compared to other impact categories. Overall, the study will help decision makers to gain deeper insight into the chain of effects the risks may cause over the life cycle of the project, enabling them to develop a more inclusive risk management framework for PPP projects.