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A Principal-Agent Theory Perspective on PPP Risk Allocation

Author

Listed:
  • Asheem Shrestha

    (School of Architecture and Built Environment, Deakin University, 1 Gheringhap Street, Geelong, VIC 3220, Australia)

  • Jolanta Tamošaitienė

    (Faculty of Civil Engineering, Vilnius Gediminas Technical University, Saulėtekio al. 11, LT-10223 Vilnius, Lithuania)

  • Igor Martek

    (School of Architecture and Built Environment, Deakin University, 1 Gheringhap Street, Geelong, VIC 3220, Australia)

  • M Reza Hosseini

    (School of Architecture and Built Environment, Deakin University, 1 Gheringhap Street, Geelong, VIC 3220, Australia)

  • David J Edwards

    (Faculty of Computing, Engineering and the Built Environment, Birmingham City University City Centre Campus, Millennium Point, Birmingham B47XG, UK)

Abstract

This study proposes a framework for the allocation of risk in public private partnerships (PPP) projects. Its contribution lies in the recognition and incorporation of risks introduced by project stakeholders, and as articulated by the principal-agent theory (PAT). The framework assesses risks and routes these risks to those parties best equipped to mitigate their impact on the project. This allocation of risk is facilitated by a thirteen-step process. The practical benefit of this study lies in outlining a clear, systematic method for allocating risk efficiently to both the government and private enterprise parties of the project. In so doing, risk mitigation can be expected to improve project performance, optimize stakeholder goals, and enhance sustainability objectives, including improved operational life-cycle efficiency and elevated social and community benefits.

Suggested Citation

  • Asheem Shrestha & Jolanta Tamošaitienė & Igor Martek & M Reza Hosseini & David J Edwards, 2019. "A Principal-Agent Theory Perspective on PPP Risk Allocation," Sustainability, MDPI, vol. 11(22), pages 1-18, November.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:22:p:6455-:d:287721
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    References listed on IDEAS

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    Cited by:

    1. Pamela Akinyi Oyieyo & Charles M. Rambo & Anne Ndiritu, 2020. "Ranking the prevalence of construction cost overrun risk factors in completion of public-private partnership projects: A case of the Sondu-Miriu hydro-electric power project in Kenya," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 9(5), pages 351-356, September.
    2. Jeffrey Kouton & Wilfried Sanogo & Nandi Djomgoue, 2023. "Risk allocation in energy infrastructure PPPs projects in selected African countries: does institutional quality, PPPs experience and income level make a difference?," Economic Change and Restructuring, Springer, vol. 56(1), pages 537-580, February.
    3. Vu Minh Ngo & Huan Huu Nguyen & Hiep Cong Pham & Long Hoang Nguyen, 2024. "Engage or retreat? Exploring the determinants of participation in Climate Finance public-private partnerships," Climatic Change, Springer, vol. 177(7), pages 1-30, July.
    4. Jolanta Tamošaitienė & Hadi Sarvari & Daniel W. M. Chan & Matteo Cristofaro, 2020. "Assessing the Barriers and Risks to Private Sector Participation in Infrastructure Construction Projects in Developing Countries of Middle East," Sustainability, MDPI, vol. 13(1), pages 1-20, December.
    5. Hongqiang Wang & Qiaoyan Lin & Yingjie Zhang, 2022. "Risk Cost Measurement of Value for Money Evaluation Based on Case-Based Reasoning and Ontology: A Case Study of the Urban Rail Transit Public-Private Partnership Projects in China," Sustainability, MDPI, vol. 14(9), pages 1-22, May.
    6. Jolanta Tamošaitienė & Vahidreza Yousefi & Hamed Tabasi, 2021. "Project Portfolio Construction Using Extreme Value Theory," Sustainability, MDPI, vol. 13(2), pages 1-13, January.
    7. Evgeny V. Popov & Viktoriya L. Simonova & Vitaly V. Cherepanov, 2022. "The principal–agent problem amid digital transformation," Upravlenets, Ural State University of Economics, vol. 13(3), pages 2-15, July.
    8. Christiono Utomo & Sulfiah Dwi Astarini & Dewa Made Satriya Wibawa Mertha & Yani Rahmawati & Aqsha & Cahyono Bintang Nurcahyo & Maulita Nahdiyah, 2022. "Decision Factors of Stakeholder Integration in Connected Construction for Circular Economics," Sustainability, MDPI, vol. 14(23), pages 1-18, December.
    9. Lima, Sónia & Brochado, Ana & Marques, Rui Cunha, 2021. "Public-private partnerships in the water sector: A review," Utilities Policy, Elsevier, vol. 69(C).
    10. Juan Tan & Jinyu Wei, 2024. "Configurational Analysis of ESG Performance, Innovation Intensity, and Financial Leverage: a Study on Total Factor Productivity in Chinese Pharmaceutical Manufacturing Firms," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 13803-13827, September.
    11. Khwaja Mateen Mazher & Albert P. C. Chan & Rafiq M. Choudhry & Hafiz Zahoor & David J. Edwards & Ahmed M. Ghaithan & Awsan Mohammed & Mubashir Aziz, 2022. "Identifying Measures of Effective Risk Management for Public–Private Partnership Infrastructure Projects in Developing Countries," Sustainability, MDPI, vol. 14(21), pages 1-19, October.
    12. Gabriel Castelblanco & Jose Guevara & Harrison Mesa & Diego Flores, 2020. "Risk Allocation in Unsolicited and Solicited Road Public-Private Partnerships: Sustainability and Management Implications," Sustainability, MDPI, vol. 12(11), pages 1-28, June.
    13. Yan Wang & Yujie Wang & Xiuyu Wu & Jiwang Li, 2020. "Exploring the Risk Factors of Infrastructure PPP Projects for Sustainable Delivery: A Social Network Perspective," Sustainability, MDPI, vol. 12(10), pages 1-26, May.

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