Public-private partnerships: a critical review of risk management in Australian social infrastructure projects

As the procurement process becomes more and more complex, particularly given the increasing numbei of project stakeholders, Australian Governments are managing the interdisciplinary challenges by turning to the private sector to form partnerships in the finance, design, construction, ownership and operation of social infrastructure projects. Subsequently, Public-Private Partnerships (PPPs have evolved as an alternate means for developing public infrastructure using private sector expertise. This research focuses on the risk management process of PPP consortiums involved in social infrastructure projects. Social infrastructure projects (such as schools, hospitals and prisons) are generally smaller in scale than economic infrastructure projects (which include toll-roads, bridges et al) but, they can be far more complex. The research results are presented from a private sector point of view after conducting semi-structured interviews with senior managers involved in the tender process of Australian social infrastructure PPP projects. The results indicate that government policy limiting risk allocation and the sharing of business operation is a restricting factor for private sector stakeholders in the development of a successful revenue stream. Social infrastructure PPPs have relatively higher bid costs compared to economic PPPs with only a marginal increase in business opportunity. The Public Sector Comparator (PSC) model is inaccurate as it is an approximation that is not based on current costs or the cost of transferring risk to the private sector. This ultimately results in the public sector reducing the project scope before increasing the budget. Social infrastructure PPPs must allow for the private sector to utilise its expertise and gain a broader scope of work and an increased transfer of risk and responsibility