Risk Management in Transport PPP Projects
In the Islamic Countries
258
environmental risk, technology risk, disruptive technology risk, public acceptance, security risk,
subcontractor disputes/insolvency, renegotiation risk, residual value risk.
It is a general expectation of PPPs in the investigated countries that the involvement of the
private sector brings know-how and competence to the project if not also to the public sector.
The involvement of the private sector also mitigates the risks associated with delays in the
implementation of the project and cost overruns. In general terms the analysis shows that
PPPs are effective under this point of view. PPPs usually involve a structured and multiple set of
supervising, controlling and monitoring activities and reporting system that, if appropriately
performed, represents an effective risk mitigation factor in terms of implementation of
construction works. Indeed, where problems appear at this stage, these are usually related to
failures in the supervision and reporting system or inadequate follow up of the outcome of the
monitoring process. Efficiency gains and higher quality of services are also expected from
the operation of the assets by private companies. The analysis seems confirming that PPPs in
the investigated countries are normally effective under this standpoint and that benefits may
also be expected in terms of transfer of know-how and competences.
Notwithstanding the above overall expectations, which generally support the allocation of
technical risks primarily to the private sector, the identification, allocation and treatment of this
type of risks in the investigated countries is defined in contractual documentation . Differences
may indeed exist between PPPs in the scope of the works to be implemented, as certain works
could also be implemented by the public party (e.g. port basic infrastructure in terminal
concessions granted to private or public-private partnerships). Mode specificities also exist as
for instance disruptive technology risks may fall under the responsibility of the state in the
airport sector for investments required by changes in international air traffic management
technology, whereas the private party may bear the cost of new technology equipment and
solutions, especially if associated with efficiency gains.
Public acceptance risks are also included in this category of risks, which generally fall under
the responsibility of the public sector. Public acceptance risks related to a specific project are
generally mitigated by specific consultation activities to be generally organized at the project
identification and preparation stage. Mitigation factors of this type of risks are also represented
by an appropriate national and sector planning process as well as transparent identification
process of PPP initiatives. As commented in the above section related to context related risks,
weaknesses seem to be present in the investigated countries in this regard. Similarly the project
preparation practices seems to support the consideration that public consultations are not
generally performed.
Financial sustainability risks
Financial sustainability risks refer to revenue risks and demand risks. This type of risks has been
extensively subject of studies on the implementation of PPPs and mega-projects over the course
of the past 20 years, many of these studies showing that demand and revenue forecasts were
usually overestimated. The analysis performed as part of this study also shows that for some
projects demand and or revenue estimates were either over or underestimated. Whilst
weaknesses appear to exist at the stage of project preparation concerning traffic and revenue
estimates for some of these initiatives, the reasons of discrepancies between real observed data