Risk management in public-private partnerships: emerging Issues in social infrastructure projects

Australian governments are turning to the private sector to form partnerships in the finance, design, construction, ownership and operation of social infrastructure projects. This has become a major challenge for both public and private sector stakeholders. The emergence of Public-Private Partnerships (PPPs) provides an alternate means for developing infrastructure using private sector expertise. Social infrastructure projects are generally smaller in scale than economic infrastructure projects, but, tend to be more complex. Social Infrastructure projects include schools, hospitals and prisons. Potential private sector stakeholders for social infrastructure PPPs are often presented with a situation where government policy, such as risk allocation, toward the sharing of the business operation is a restricting factor for the development of a successful revenue stream. The fundamental principal of risk management is that risks should be proportionally allocated to the individual or group on the basis of the ability to carry that risk. In PPPs risk allocation must motivate all parties to take responsibility for their actions and delivery to make projects more accountable. Australian examples of social infrastructure PPPs must allow for the private sector to utilise its expertise and gain a broader scope of work and an increased transfer of responsibility (risk). The paper focuses on how PPP consortiums manage the many risk factors involved. The results are presented from a Private Sector point of view.