The Allocation of Risk in Public-Private Partnership: A Study on Canadian Transportation Projects

Abstract

In the past two decades, public-private partnership (PPP) procurement has been used in many transportation projects in Canada. Its efficiency to deliver projects within time and budget has been proven and the transfer of risks to the private sector is now known to be the principal advantage of PPP. However, the negotiation and allocation of risk can take an important amount of time, and the misallocation of these risks can cause serious management trouble. In order to reduce management time in contract negotiation and to provide a guideline to PPP practitioners, an analysis of value for money (VFM) documents was conducted on 19 Canadian PPP transportation projects. The results showed strong patterns of risk allocation to the private sector for the risk related to the design, construction, cost overrun, and delay. The operation, maintenance, residual value, geotechnical, and inflation on construction risks showed a soft pattern of allocation to the private party. The quantitative results of this paper correlate with the previous qualitative research made on the preferred risk allocation. The research finding should provide the public and private sector with a guideline of risk allocation from the perspective of previous PPP projects.