As an inter-disciplinary consultancy, McBains Cooper is increasingly involved in advising on aspects of social infrastructure projects to be procured under various forms of Public Private Partnership, PPP.
The attraction of PPP is the sharing rather than transfer of risk. However, this requires arrangements between the parties that are vastly different to those that would prevail in the public sector. This gives rise to risk particular to this method, or risk of a type that one or other of the parties would not normally accept.
Such risk includes:
Political/ Legislative Change
* Changes to the technical specifications, or scope, as a result of political processes driving the project e.g. central government directives, planning conditions, or stakeholder consultations.
* Legislative changes affecting technical standards of restrictions on use of certain construction materials, CDM regulations.
* Changes emanating from market or public sentiment e.g. standards of environmental protection, sustainable energy supply.
* Increasing levels of security against terrorism and crime generally.
Pre-Existing Conditions
* Reliance on surveys of publicly owned land, buildings and equipment carried out by one or other partner and their assessments for resolving problems
* Insurability of existing publicly owned land, buildings and equipment during project work
* Integration of the project with existing land, buildings and equipment.
Technical feasibility of innovative projects
* Robustness of technical research underlying the project
* Reliance on developing technologies e.g. IT capacities and alternative energy sources.
* Lack of data on life-cycle and life-cycle costs
Dependencies and Linked Projects
* Decanting of people and/or equipment to alternative sites, either permanently or temporarily, or working round them during development
* Projects under development controlled by third parties which are necessary for the development and/or operation of the project e.g. road and rail linkages, service connections, facilities feeding demand for the project
* Availability of necessary skills, labour, materials or manufactured components within planned time frame of the development
Management and Delivery
* Incompetence, negligence or error, of partners
* Economic and social consequences of failure to deliver the project on programme or to specification e.g. dependence of other public projects on delivery of PPP project, loss of income or business relationships if delivery fails or is sub-standard.
In the confines of this article it is not possible to detail how these risks may be obviated or mitigated.
It goes without saying that, at the outset, there must be mutual understanding of each party’s culture and their expectations. However, in general the special risks can be addressed by ensuring that the public sector partner institutes effective communication channels with all other government agencies whose work may impact on the project. Also, that all parties in the SPV have full access to information on project-progress and that the system of governance is such that no major decisions are taken without full and proper consideration and authorisation.
This article was penned by Dr Geoff Seeff, Head of Regeneration at McBains Cooper, for BURA news.
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