Risk Management in Transport PPP Projects
In the Islamic Countries
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Traditionally, different justifications have been suggested (Boeuf, 2003) for a direct involvement
of the public sector in the construction, financing and operation of transport infrastructures
beyond the planning and regulating role:
 High capital expenditure and long technical/economic life;
 High social, environmental and technical risks during construction;
 Significant direct and indirect external effects (e.g. on land use, regional development,
environment);
 Difficulties of cost recovery from users, which often make the potential financial
profitability lower than economic profitability and justify public subsidies;
 Monopolistic situation of infrastructure operators at local level;
 Long financial payback periods even when projects are financially viable;
 Limited control on traffic evolution.
Against this background, in the last decades of the twentieth century, new regulatory
frameworks as well as financial products have been developed to increase the private sector
participation in the development of transport assets, delivering Value-for-Money for the whole
society. The increasing need for a rapid development of infrastructures and budgetary
constraints have further contributed to the willingness of governments to seek new ways of
financing facilities. Virtually all transport modes have been concerned by these developments:
roads, air transport, sea and river ports, railways, public transport (including buses, metros light
rail and trams), and freight transport (The Economist Intelligence Unit, 2013). As experience
has shown that the private sector’s capitals and know-how can make a tangible difference in the
delivery of critical transport services while generating improvement in public sector
management (Medda et al., 2013), selecting a private sector partner has become an increasingly
attractive option (Carbonara et al., 2015).
Nevertheless, PPPs also bring about some threats as compared to traditional public
procurement. They entail, for example, potentially higher cost of financing (because the private
operator faces more finance costs than public entities), or higher transaction costs, as PPP
models are generally more complex from a contractual and organizational point of view
compared to conventional public procurement. Thus, in addition to project-related risks, several
potential issues stem as well from PPP inherent characteristics as a procurement method.
Aiming at an in-depth analysis of risk management practices in transport PPP projects, this
study adopted a comprehensive conceptual framework which allows to take into account
not only the contractual dimension of PPPs, but also the institutional setting in which they are
embedded. The framework will follow the phases of the project life-cycle and analyze each of
them in the light of the risk governance dimensions relevant at each stage. In fact, as risk
management represents the key challenge in PPP projects critically affecting their
performance, it is essential to examine all development phases of a PPP with the perspective of
how they influence the risk management process.