Risk allocation preferences in PPP/PFI construction projects in the UK

Bing, L, Akintoye, A, Edwards, P and Harcastle, C 2004, 'Risk allocation preferences in PPP/PFI construction projects in the UK', in R. Ellis and R. Bell (ed.) Responding to Change: Proceedings, Leeds, UK, 7-8 September 2004.

Document type: Conference Paper
Collection: Conference Papers

Title Risk allocation preferences in PPP/PFI construction projects in the UK
Author(s) Bing, L
Akintoye, A
Edwards, P
Harcastle, C
Year 2004
Conference name COBRA 2004: The RICS International Construction Conference
Conference location Leeds, UK
Conference dates 7-8 September 2004
Proceedings title Responding to Change: Proceedings
Editor(s) R. Ellis
R. Bell
Publisher RICS Foundation
Place of publication London, UK
Abstract For PPP/PFI projects, the public client provides a risk allocation scheme before the contract goes for tender. Ideally, a risk matrix saves both the public client and the private contractor time in negotiation. It is therefore important to know which risk factors are best assigned to the public sector and which to the private sector. The aim of the paper is to explore this question. The paper first addresses issues of risk classification and risk allocation. A meta-level approach to categorising project risks is proposed as an aid to risk classification. Using this approach, the paper then presents the findings of survey research which was used to explore the risk allocation preferences of people involved in PPP/PFI construction projects in the UK. The findings show that the majority of risks encountered in PPP/PFI projects can be allocated quite readily between the public and private sector parties. Five risks are preferably retained in the public sector. These are: nationalisation/expropriation, poor political decision-making process, political opposition, site availability and government stability. Relationship risks, force majeure and legislation change risks should preferably be shared by both parties. The majority of the remaining risks, are best allocated to the private sector, but four risk factors: level of public support, project approval and permits, contract variation, and lack of experience cannot easily be allocated to either party, nor shared, and should therefore be allocated on a case-by-case basis.
Copyright notice RICS Foundation © 2004
ISBN 1842191933
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