A risk allocation framework for public private partnerships (PPP) water infrastructure projects in Sri Lanka

In Sri Lanka continuous infrastructure development is necessary for the country’s future but this creates a serious financial burden for the government. To deliver infrastructure within constrained public finances, it is necessary for the government to consider a novel approach for infrastructure projects. One proposed approach is Public Private Partnership (PPP), a form of best sourcing that is used to work with private sector. However, PPP based projects are complex and difficult undertakings that involve a variety of risks. Conflicts related to the extent of transfer of risks from public to private sector can also be seen in such ventures. Therefore, this research addresses the issue of risk allocation between sectors in implementation of PPP based project using the context of water supply projects in Sri Lanka.The methodology adopted in this research was the quantitative approach. Initially, various risks associated with PPP based water supply project were identified through literature review and a questionnaire survey (1st Questionnaire) to Sri Lankan experienced project practitioners in the public and private sectors. In the questionnaire survey, 60 valid and usable responses were returned out of 100 potential respondents. Subsequently, relative importance value of the risks was estimated applying Analytical Hierarchy Process (AHP) for the data collected through the 2nd Questionnaire survey to the same 60 respondents as replied to the 1st Questionnaire.The risk allocation framework is suggested based on an assumption developed in this research which underlies the relation between the relative importance value and the project practitioners’ perception to a risk, that is if a project practitioner considers controllability of his/her organization to a risk is low, the risk might be a higher priority/importance for the organization to manage. Risk management capability of the contracting parties was quantitatively assessed in terms of least in control by the party and the risk allocation was made based on the risk management capability, considering the sector specific conditions of water supply and locally focused risk list in Sri Lanka. The risk allocation framework developed in this research is highly consistent with risk allocation identified through prevalent discussion on nature of risks and the better party for allocation.The framework was validated through the 3rd Questionnaire survey to the same 60 research participants as replied to the previous two questionnaires. In this questionnaire survey, 23 valid and usable responses were returned. The results obtained from this validation process indicated that the majority of the respondents accepted the research findings and recommendations, and that the framework was valid and capable for use in practice. These research outcomes will assist the government introducing PPP based infrastructure projects in the water supply sector and will inform the private sector in considering their participation in PPP based projects