Public Private Partnerships - What, Why, and How is Risk Allocated?

Navigant Construction Forum™ Quarterly Research Perspective

In recent years, Public Private Partnership (P3) infrastructure projects have become increasingly common, especially in the US and UK. For the public sector, the goal is to lower the whole life cost of projects and speed up delivery. For private contractors, it offers stable and attractive returns, funded by the public purse over the long run. A study of P3 projects reveals that while many have been successful, some have failed or gone into bankruptcy - with inadequate governance and inappropriate risk allocation as key factors.

P3 projects require a different form of procurement and utilize a different project delivery method which can apply to all stages of the project lifecycle from financing to designing, building, operating and/or maintaining. Typically, P3 projects allocate risk differently than traditional design-bid-build or even design/build projects. Typical project risks include pre-construction risks (land acquisition, permits etc); construction period risks (rise in raw material costs, delays, etc); O&M period risks (asset failures, unavailability of maintenance materials, etc); commercial and market risks (demand risk, change in law, etc). In this research perspective, the authors explore these various risks and do a deep dive into P3 projects as a whole.

Read More

About the Experts

Back to top