Rebalancing risk allocation on infrastructure projects
First published on 7 August 2020
Public Private Partnerships involving the use of private sector contractors and private finance have been a popular contract delivery model for major infrastructure projects in Australia for years, well before they were even called PPPs. The model is often preferred by government over publicly funded contract delivery models because of its additional risk transfer to the private sector.
However, calls for a risk allocation reset by contractors and engineering companies are becoming louder, and their reduced risk appetite is reflected in tendered prices for infrastructure works (or a refusal of contractors to bid on these works at all).
This paper considers how PPPs provide opportunities for equity investors and managing contractors to manage risks that construction contractors are no longer prepared to take, and at the same time reduce the overall risk-adjusted project cost for government and taxpayers.
