Risk Management in Transport PPP Projects
In the Islamic Countries
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 Definition of toll/tariff levels. Since transport is seen as an essential ‘public good’, in
transport PPPs the tariff is regulated and the private sector has no room to engage in tariff
definition;
 Payments to the procuring authority (in projects with excess revenues). When the PPP
has revenue potential in excess of the one foreseen to ensure commercial feasibility,
governments may choose to decrease the tariffs or capture the benefit as a revenue for the
government itself;
 Risk structuring matters related to volume. When demand risk is significant (for
instance, in cases where no historical data are available that could be used to estimate
demand), limiting or sharing such risk can become necessary. Tools to do this are
represented by contractual mechanisms such as guarantees of minimum traffic/revenue.
Further, payment mechanisms may be volume-linked. Such cases make riskmanagement more
complex. In fact, if the PPP contract provides for the public authority to make volume-based
shadow payments8 (e.g. shadow tolls or shadow fare payments in public transport) the correct
management of demand or volume risk will become a crucial variable for the ultimate project
performance (APMG, 2016). In fact, this risk is not easy to assess and mitigate (neither for the
public nor for the private party), particularly so if no in-depth traffic analysis is available or there
is a lack of solid data.
In light of the above, volume risk structures should only be considered under specific
circumstances. In particular, this is the case when there is an alignment of interests (e.g. the
public authority is interested in higher volume) and when at the same time the traffic or volume
risk is considered reasonably assessable and manageable (APMG, 2016). Such conditions avoid
a mismatch of objectives and ensure that the incentive structure for both parties is designed so
as to lead to a positive welfare change for society.
3.2.4. Construction and asset delivery
The fourth phase in the conceptual framework, Construction and asset delivery, is divided into
two elements, corresponding to the management of risks during design and during construction.
For each of the two, the following Table sets out the relevant questions that guided the analysis
throughout the study.
8 These are contractual payments by the government to the private company operating the transport
infrastructure per customer or driver using the asset.