Risks of water and wastewater PPP projects: an investors’ perspective

Abstract

Purpose Water and wastewater (WW) projects are gaining attention in Iran because of shortages of water resources. However, these projects are lengthy and they are accompanied by numerous risks, such as lack of sufficient financial resources. Public–private partnerships (PPPs) are taken into account as a constructive approach to deal with the problem of insufficient government funds and they are increasingly being implemented to construct the required infrastructures in different countries. Although WW projects in PPPs can reduce the government’s debt, investors are still uncertain about this approach. Hence, this study aims to identify and evaluate the risk of all parties involved in WW-PPP projects, from the viewpoint of investor. Design/methodology/approach First, the risk factors which are involved in WW projects are identified by interviewing experts and reviewing the literature by means of fault tree analysis (FTA) tool. Second, the probability and effects of the risky factors which are related to specific event are evaluated and analyzed by hybridization of interval fuzzy Type-2 sets (IT2FS) and risk score formulation. Finally, some solutions are proposed to deal with the most challenging risks. Findings Six gate events, namely, risks which are related to investors such as investor’s consultant-related risks, risky conditions from engineering, procurement, and construction (EPC) contractors’ point of view, risk factors which public sector takes into account, public sector’s consultant-related risks which public sector’s consultant consider challenging and external factors were defined according to the literature. From FTA tool and by interviewing the experts, 94 basic events were identified. Finally, from hybridization of IT2FSs and risk score formulation, top five risks are determined as “Difficulty of injecting financial resources into the project,” “Fluctuation in inflation rate,” “Poor decision-making process” in public sector, “Difficulty of importing the equipment which are required for the project (such as pumps, grain catchers, garbage collectors, etc.) from other countries” and “Impact of risky conditions in other projects on operation of PPP project.” Originality/value In the absence of a constructive approach for risk identification and a reliable model for evaluating the identified risks in PPP projects, this research project is one of the first research studies which used FTA for identifying risks and hybridization of IT2FSs and risk score formulation for evaluating the risks.