Risk Allocation in Unsolicited and Solicited Road Public-Private Partnerships: Sustainability and Management Implications

Abstract

Risk allocation plays a crucial role in the successful development of public-private partnership (PPP) projects. However, despite being an important topic for scholars and practitioners, the existing literature does not provide sufficient evidence on how managing risks in solicited (SP) and unsolicited (USP) road PPP projects, and subsequently, on what the sustainability implications are for such managerial processes. This study aims to extend risk allocation studies by analyzing contracts in Chilean highway PPPs over the last decade based on a systematic content analysis framework and case study data. The framework was developed through line-by-line coding of contract provisions associated with risk-related issues, and data were collected from semi-structured interviews with Chilean PPP practitioners. Results show that, although the majority of risks are either shared or transferred to the private party in most contracts, there are important variations in the way allocation procedures are implemented for SPs and USPs. Contracts analyzed revealed that risk arrangement mechanisms have usually focused on the economic dimension of sustainability without fully incorporating social and environmental considerations, increasing protests in the long-term. Conclusions indicate that risk allocation procedures and sustainability considerations are highly dependent on project-specific features and contextual factors. Overall, the analysis uncovers that the level of autonomy given to the private sector in both SPs and USPs has contributed to properly manage technical and economic risks, but has failed to successfully allocate social and environmental concerns.