An Investigation of Political, Economic and Environmental Risk Factors That Affect Successful Implementation of Public Private Partnership Projects In The Kenyan Road Sub - Sector

A Project Report Submitted to the Chandaria School of Business in Partial Fulfilment of the Requirement for the Degree of Masters in Business Administration (MBA)Earlier research studies on Public Private Partnerships (PPP) illustrate the importance of understanding and managing risks that attach themselves to PPP construction projects to ensure successful implementation. PPPs have gained significance in the Kenyan context in the past decade as an alternative choice for policy makers in implementing important public projects. However, successful PPP projects in the Kenyan road subsector are few and far between. The focus of this research study was to investigate the risk factors that affect the successful implementation of PPP projects in the Kenyan road subsector. The research study specifically sought to investigate the political, economic and environmental risks that affect the successful implementation of PPP projects. The research study was exploratory in nature. The sampling technique employed for the study was non - probability sampling and more specifically purposive judgemental sampling. Data was collected using structured questionnaires consisting of both open and closed ended questions and interviews conducted as well. Data was analysed using the Statistical Package for Social Sciences (SPSS) Software and presented using descriptive statistical techniques such as tables, graphs and means. The descriptive statistic of mean score was computed for the five-point Likert scale on the importance of each of the risk factors. In conclusion, based on the mean scores, the risk factors were ranked according to importance, as perceived by the respondents. The target respondents for this research project were selected based on their (i) direct involvement and/ or extensive experience in PPP projects within the road construction industry, (ii) in depth knowledge of PPPs. The target population chosen for the study consisted of 20 respondents. The researcher aimed to ensure that the respondents were representative of the public, private and development partner sectors. The study found that economic risks were identified as most severe followed closely by political and lastly environmental risks. Results identified foreign exchange rate volatility, change in law and labour and material price fluctuation as the top three most severe risk factors respectively. As illustrated by the research findings, out of the fifteen (15) identified risk factors, foreign exchange rate volatility was identified as the most significant economic risk factor, with a mean score of 4.33 out of the possible 5.0. This was closely followed by change in law risk which was perceived as a very significant political risk factor, with an overall mean score of 4.08. In conclusion, the study found loss of natural habitat as the most significant environmental factor with an overall mean score of 3.25 and was ranked 10th. Recommendations for improvement suggest that where applicable parties involved insure against risk. Creating a conducive operating environment for PPP implementation will act as an incentive to donors and private sector, thus government needs to put in place appropriate legal frameworks to help such arrangements thrive. It is recommended that economic risks be averted/ reduced by providing stipulations in the PPP contract where exchange rates are fixed to help reduce effect of these risks, in addition to costs should be set in a stable foreign currency. Further, prior to commencement of the project it is recommended that a feasibility study be conducted to ascertain the viability of the project. As regards environmental risks, it is recommended that, organizations/ institutions abide by the environmental laws to alleviate chances of risks that may deter project progress. Recommendations for further studies were as follows: Further research on the risks that affect PPP projects is recommended, as the risks that affect development and implementation of PPP projects are diverse. In addition, research into the development of a generic risk assessment / management model and an equitable risk allocation mechanism for the construction industry at a national level is recommended. Researchers should consider conducting research on risk mitigation strategies for similar construction projects. In conclusion, it is recommended that the Kenyan PPP program be driven solely by the Central Government as opposed to the County Governments as this would ensure standardization, consistency and stability in the PPP market. Having 47 unique PPP markets would dissuade private participation and increase costs