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Risks in Public-Private Partnerships: Shifting, Sharing or Shirking?

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  • Hodge

Abstract

Public-private partnerships (PPPs) have now become a popular way of providing infrastructure. A commercial relationship between government and business is not necessarily a new phenomenon, but wholesale use by governments of long term, sophisticated contract techniques on private credit is. Better efficiency in infrastructure provision and strengthened monitoring and accountability are promised, along with stronger business and investor confidence. A major part of the forecast benefits from the private funding of public infrastructure arises through the transfer of risks from the public sector to private parties. This article aims to probe on an empirical basis the realities of risk transfers in PPPs and to compare this experience against both the rhetoric of project proponents and the formal contract conditions. Several conceptual issues are addressed and a case study 1$ used to illustrate some empirical experience on risk transfers under PPP arrangements Experience shows the extent to which risks were shifted or shared as planned, or whether governments ideologically predisposed to the adoption of PPPs shirked accountability for future risks by signing up to PPP deals favoring financiers. Huge financial resources and long term PPP contracts of up to several decades both make it critical to better understand the nature of risk transfers and the extent to which actual risk bearing experience differs from advocate rhetoric.

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  • Hodge, 2004. "Risks in Public-Private Partnerships: Shifting, Sharing or Shirking?," Asia Pacific Journal of Public Administration, Taylor & Francis Journals, vol. 26(2), pages 155-179, December.
    • Handle: RePEc:taf:rapaxx:v:26:y:2004:i:2:p:155-179
    DOI: 10.1080/23276665.2004.10779291
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    References listed on IDEAS

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    1. M.G. Pollitt, 2000. "The Declining Role of the State in Infrastructure Investments in the UK," Cambridge Working Papers in Economics 0001, Faculty of Economics, University of Cambridge.
    2. Richard J. Green and Michael G. Pollitt, 2008. "Introduction," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 1-2.
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    1. Anastasia Kireeva & Tatiana Tischenko & Ilya Sokolov & Elizaveta Khudko, 2012. "Public Private Partnership as an Instrument for Supporting Innovations," Published Papers 167, Gaidar Institute for Economic Policy, revised 2012.
    2. Nikolai Mouraviev & Nada K. Kakabadse, 2014. "Risk allocation in a public-private partnership: a case study of construction and operation of kindergartens in Kazakhstan," Journal of Risk Research, Taylor & Francis Journals, vol. 17(5), pages 621-640, May.
    3. Ivanov, A., 2015. "On the new approach to the risks' identification in the projects of public-private partnership," Working Papers 6414, Graduate School of Management, St. Petersburg State University.
    4. Hossein Askari & Abbas Mirakhor, 2014. "Risk sharing, public policy and the contribution of Islamic finance," PSL Quarterly Review, Economia civile, vol. 67(271), pages 345-379.
    5. Love, Peter E.D. & Zhou, Jingyang & Edwards, David J. & Irani, Zahir & Sing, Chun-Pong, 2017. "Off the rails: The cost performance of infrastructure rail projects," Transportation Research Part A: Policy and Practice, Elsevier, vol. 99(C), pages 14-29.

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