Risk Management in Transport PPP Projects

In the Islamic Countries

Risk Allocation

. As a core feature of PPPs, risks must be distributed between the public

and private parties involved. Under this dimension, the challenge is to find the optimal

risk allocation, identifying which party is best positioned to bear each risk;

Risk Monitoring

. Risks, risk perceptions, and risk mitigation measures may change

over the project’s lifetime. As such, risks are the target of specific monitoring activities.

Quality and availability of monitoring tools, as well as dedicated agencies or offices for

the monitoring of the delivery and performance of PPPs play a crucial role in this regard;

Risk Treatment

. In order to deal with risks, each of the parties faces choices related to

avoiding, optimizing, transferring or retaining risk. Following this choice, specific

measures can be taken to address every different risk.

These risk governance dimensions represent the analytical lenses through which the study

described the different investment phases, following a life-cycle approach as recommended in

relevant international literature. The investment life-cycle has been structured in the following

six investment phases:

As a first phase,

Strategy and policy

refers to the political and institutional context and

the legal framework in relation to transport PPPs;

The

Pre-tendering decision process

refers to the procedures adopted at the appraisal

phase of transport PPP projects and the reasons behind the adoption of PPP as a

procurement method;

The third phase refers to the different solutions adopted for the

Procurement

and

contracting

of works and services and the different typologies of PPP arrangements;

Under the

Construction

and asset delivery

phase, the analysis will address the

systems to cope with different types of risks that challenge the project outcome before

asset delivery and the monitoring systems in place;

The

Operation

phase refers to the management of risks during service delivery by the

private sector, as well as to the possibility to renegotiate the contractual arrangement;

Finally, the study will analyze the last steps of the contract agreement and its

End

, as

well as the existence of mechanisms to systematically follow up on risk management

practices and learn from experience.

In addition to the six phases summarized above, capacity-building has been identified as a cross-

phase element. For each phase of the project life-cycle, the study will examine which are the

necessary tools for risk management of transport PPP projects, analyzing the need for capacity-

building measures to ensure the necessary level of skills in the involved staff.

The resulting conceptual framework is graphically illustrated in the matrix presented in the

following Table. For each investment phase, the relevant risk dimensions are colored green and

the sign “+” indicates their degree of relevance. The table also provides an indication of the

elements of analysis under each phase of the project life-cycle, that have also guided the

research.