Risk Management in Transport PPP Projects
In the Islamic Countries
48
Table 13: Overview of elements of Phase 4) Construction and asset delivery
Phase Elements included
Construction
and asset
delivery
 Management of risks during design phase: Which specifically dedicated
methods or institutions are in place for PPPs risks monitoring purposes? Is there
any evidence of the need to adopt new statistical indicators and/or dedicated
agencies or offices for the monitoring of the delivery and performance of the PPPs?
 Management of risks during construction: What type of methods/institutions
have been designed for PPPs risks monitoring purposes? Is there any evidence of
the need to adopt new statistical indicators and/or dedicated agencies or offices
for the monitoring of the delivery and performance of the PPPs? Which practices
are adopted for the management of unforeseen risks and events during project
implementation?
Source: Authors.
Management of risks during design phase
The contract management stage opens with design, one of the most important inputs for project
construction and service delivery alike. This stage of the project life-cycle is characterized by
two types of event, which jointly constitute the design risk (APMG, 2016):
 Defects in design that result in the infrastructure being built, but failing to meet the
prescribed standards and the legal requirements imposed by environmental or other
stipulations;
 Defects or failures in design that result in the project not meeting the service standards
requested in the contract, or that result in an increase in operation and maintenance costs
in order to meet the service requirements.
A poor project design can be caused by incorrect forecasts or assumptions on numerous
variables related for instance to demographics, demand, prices, revenues and the estimation of
risks.
In transport PPPs, design is generally developed by the private party, which is therefore in
charge of putting in place measures to mitigate design risk, mainly by selecting specialized
experts to perform this task and implementing a rigorous quality review through independent
experts to examine the prepared design and monitor compliance. Such actions are aimed to
ensure that the design phase does not negatively affect the ultimate project performance, as
without an appropriate design, there is a concrete risk of failing to complete the project in time
and within the budgeted costs. Further, design shortcomings can require the project to be
modified after construction and cause diminished returns and ultimately less welfare for
society.
A different risk which is strongly linked to the design phase (despite being relevant for the whole
project life-cycle) is the environmental risk, particularly when projects must pass an
Environmental Impact Assessment covering, among other elements, the general contamination
or pollution, noise pollution, water contamination and the overall impact on the natural
environment. If not correctly addressed from the early design phase, these issues may lead to
changes in the design at a later stage, having a direct impact in terms of capital expenditure costs
and delays in project operation. In order to mitigate environmental risk at an upstream stage,