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INTERNATIONAL JOURNAL OF

PROJECT
MANAGEMENT
International Journal of Project Management 24 (2006) 587–594
www.elsevier.com/locate/ijproman

Role of public private partnerships to manage risks in public


sector projects in Hong Kong
a,*
Li-Yin Shen , Andrew Platten b, X.P. Deng c

a
Department of Building and Real Estate, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong
b
Elevate East Lancashire, Accrington, England, UK
c
School of Civil Engineering, South East University, PR China

Abstract

The clients of public sector works have an obligation to ensure that the large scale investment in public works is effective and can
achieve improvement in social and economic performance. However, construction activity is usually subject to more risk than other busi-
ness activities because of its complexity particularly in coordinating a wide range of disparate and interrelated skills and activities. This
complexity is further compounded in implementing public sector projects where multiple project objectives are expected by a wide range
of stakeholders who have different interests associated with the projects. With reference to current practice in Hong Kong, this paper
examines the major risks in implementing public sector works, and the ways that the application of public private partnership (PPP)
can help to manage risks in project delivery. The example of Hong Kong Disneyland (KDLD) demonstrates how various major risks
in committing to a PPP project are allocated and shared effectively between public and private partners. In this typical PPP project,
it is found that allocation of site acquisition risk and legal and policy risks to the public sector is more effective while private sector could
effectively allocate the design and construction risks, operation risks and industrial action risk to the private sector. Also, development
risks, market risks, financial risks and force majeure could be shared effectively between the two partners. These results present valuable
lessons for both the practitioners and researchers in application of PPPs to manage risks in delivering of public sector projects in other
countries and regions.
Ó 2006 Elsevier Ltd and IPMA. All rights reserved.

Keywords: Public private partnership; Public sector project; Risk management; Hong Kong

1. Introduction investments. The public sector projects in Hong Kong are


broadly divided into two groups: (a) public housing projects
Public sector project (PSP) is a generic reference which is undertaken by the Housing Authority; (b) other public sec-
applied to a wide range of public works. PSPs usually rep- tor works commissioned by the Government of the Hong
resent major part of construction works in any country or Kong Special Administrative Region, the Airport Author-
region. According to the report of Hong Kong 2002 [1], ity, the Kowloon–Canton Railway Corporation (KCRC),
the HK Government was to spend about HK$28 billion and the Mass Transit Railway Corporation (MTRC) [2].
on capital works in 2002–2003, and maintain an average Studies suggest that the tradition of cost and time over-
annual capital works expenditure of about HK$29 billion runs, poor safety performance, poor quality and environ-
in the coming years. Risk management therefore becomes mental performance in delivering PSPs remain to large
an important mechanism to be adopted to ensure achieve- extent unchanged [3–5,2]. Flyvbjerg et al. [4] examined
ment of the planned objectives in committing to these great 258 large transport infrastructure projects covering 20
countries, and they found that cost overruns occurred in
*
Corresponding author. Tel.: +852 2766 5805; fax: +852 2764 5131. almost 90% of the projects examined, with the highest cost
E-mail address: bsshen@polyu.edu.hk (L.-Y. Shen). overruns of 86% and 28% on average. According to the

0263-7863/$30.00 Ó 2006 Elsevier Ltd and IPMA. All rights reserved.


doi:10.1016/j.ijproman.2006.07.006
588 L.-Y. Shen et al. / International Journal of Project Management 24 (2006) 587–594

report of NAO [6], approximately 70% of the projects and understanding of the application of PPPs in Hong
financed by the central government experienced delays in Kong public sector works. The Efficiency Unit is the official
final completion in the UK, for example. Other conse- department for promoting the application of PPPs in Hong
quences due to poor project performance include poor Kong [8]. A case study analysis on PPP project in Hong
investment returns from the use of the project, delay in Kong was also conducted. The selected case study is a typ-
the utilisation of the public facilities and extended inconve- ical PPP project in Hong Kong which constitutes the public
nience for the public. All of these problems exert a huge real estates operated by private sectors. The analyses on
financial pressure on government, and they can hold back these data will result in valuable research findings to pres-
or impair planned economic development. ent lessons learned in application of PPPs to manage risk in
To improve the efficiency of managing project risks, the public sector projects in other countries or regions. The
Hong Kong Government has been promoting the applica- paper is structured in the following manner. First, the
tion of new procurement strategies for the implementation paper presents an investigation into the delivering of public
of public sector works, in particular, the mechanism of sector projects in Hong Kong, which will lead to an analy-
public private partnerships (PPPs). PPP is an effective sis of typical risks in public sector projects. Third, the role
approach to enhance project productivity by bringing in of PPP to manage risks in public sector project is presented
management efficiency and creative skills from business in a framework based on insights from the above analysis.
practice, and reducing governmental involvement by using Forth, the framework is applied to conduct a case study on
private sectors in the provision of public services. PPP is a a PPP project in recreational sector in Hong Kong. Finally,
development from the procurement strategy of BOT conclusions and recommendations follow.
(Build, Operate and Transfer) and it is particularly suitable
for large scale infrastructure projects. BOT system has been 1.1. Delivering of public sector projects in Hong Kong
mainly promoted in developing economies where infra-
structure works account for the majority of public invest- In Hong Kong, the construction funds for implementa-
ment. This situation arises from the need to reduce the tion of public sector projects mainly come from govern-
public sector budget contribution to infrastructure invest- ment’s Capital Works Reserve Fund (CWRF), which was
ment and where efficiency gains from commercial practices established in 1982 by Resolution of the Legislative Coun-
can be imported to the sector. In order to reduce public cil (LC) [9]. The income of CWRF is mainly derived from
borrowing to finance direct expenditure, the governments the land premium, which is used to finance public works
in developing countries have found private sources of pro- programmes (PWP) including public construction works
ject finance as an effective strategy to assist implementation [1]. The system known as the Capital Works Reserve Fund
of these projects [7]. The application of PPP has become Resource Allocation System (CWRF-RAS) was introduced
increasingly popular in developed economies for gaining in 1987 to regulate the finance schedule for the planning of
the advantage of improving efficiency and mitigating risks. capital works expenditure on a five-year basis. Within
The Hong Kong Efficiency Unit [8] opted that effectiveness PWP, projects are grouped under various expenditure
of PPP is based on a partnership approach, where the headings, exampled with Table 1, which denotes the expen-
responsibility for the delivery of services is shared between diture under each heading over the period 2003–2004 [10].
the public and private sectors, both of which bring in their The government is the largest client of the construction
complementary skills to the enterprise. industry in Hong Kong. The total Public Expenditure in
By referring to the practice in Hong Kong, this paper 2001–2002 is HK$269.4 billion, of which the expenditures
examines the major risks in the implementation of public on housing and infrastructure were HK$32.1 billion and
sector works, and thereby the ways that the application HK$24.9 billion respectively, assuming 21.9% of the total
of PPP can effectively manage risks in project delivery. expenditure [11]. The ETWB (Environment, Transport
Two constructive interviews with senior officials in the Effi- and Works Bureau) is responsible for implementation of
ciency Unit of the Hong Kong SAR Government were con- all public projects except public housing which is managed
ducted for data collection and discussions. The discussions by the Housing Authority. ETWB is the policy maker who
over the two planned interviews generated valuable data is responsible for coordination of the project from the pro-

Table 1
Categories in the PWP and expenditure in 2003–04 (Hong Kong)
Head 701 Head 702 Head 703 Head 704 Head 705 Head 706
PWP Land acquisition Port and airport development Buildings Drainage Civil engineering Highways
HKD (billion) 1.37 0.82 9.14 2.18 3.72 5.06
Head 707 Head 708 Head 709 Head 7010 Head 7011
PWP New towns and urban Capital subventions and major Waterworks Computerization Housing
area development systems and Equipment
HKD (billion) 2.90 5.54 1.09 1.12 1.52
L.-Y. Shen et al. / International Journal of Project Management 24 (2006) 587–594 589

posal stage to construction completion and establishment Fig. 2 indicates the organisational structure of the Civil
of the policy and technical guidelines for expeditious imple- Engineering Department (CED).
mentation of project programme. The scheduled construc- Similarly, Fig. 3 shows the organisational structure of
tion works will then be carried out by contractors selected Highways Department (HD) of the ETWB.
through tendering. ASD is responsible for the provision of professional and
The ETWB consists of a number of departments includ- management resources on all matters relating to public
ing Architectural Services Department (ASD), Civil Engi- buildings (except public housing). It includes several
neering Department (CED), and Highways Department branches assuming different roles as shown in Fig. 1 [12].
(HD). They are the main departments responsible for Fig. 2 shows the organisational structure of CED [13],
implementation of public projects. The ETWB’s organisa- whose main mission is to provide services for slope safety,
tional structure is shown in the following figures. Fig. 1 port development and land formation. And Fig. 3 presents
shows the organisational structure of Architectural Ser- the organisational structure of HD [14], which is responsi-
vices Department (ASD) of the ETWB. ble for planning, designing, construction and maintenance

Architectural Services
Department (ASD)

Project Project Project Project Project Project


management management management management management management
branch branch branch branch branch branch

Fig. 1. Organization structure of the ASD.

The Civil Engineering


Department (CED)

Civil Engineering Geotechnical


Special Duties Office
Office (CEO) Engineering Office
(SDO)
(GEO)

Project Hong Landslip


Land
Port Management Kong Mainland Development Preventive
Development
Branch Branch Island Branch Branch Measures
Branch
Branch Branch

Fig. 2. Organization structure of the CED.

Highways
Department (HD)

3 Regional Offices Major Works Railway


(Hong Kong, Management Development
Headquarters
Kowloon &New Office (MWMO) Office (RDO)
Territory)

Fig. 3. Organization structure of the HD.


590 L.-Y. Shen et al. / International Journal of Project Management 24 (2006) 587–594

of the public road system. It is also responsible for plan- many and varied. These features indicate that the multiple
ning and facilitating the implementation of the railway net- objectives in implementing a public sector project are
works. The major duties of the three regional offices in HD affected by a wide range of risks that exist in different
are to implement capital works, perform administration dimensions and at different stages in project life cycle.
and undertake highway maintenance in the three adminis- Thus, the risk outcomes are beyond the scope of the pro-
trative regions. HD’s Major Works Management Office ject itself. These risks are typically grouped into various
(MWMO) is responsible for implementation of large capi- categories such as contractual, environmental, financial,
tal works, involving the investigation, design and construc- economic, market, logistical, design, construction and
tion of new roads, bridges and associated drainage works. operational risks. The failure to manage these risks effec-
Its Railway Development Office (RDO) coordinates the tively may lead to serious consequences including poor
implementation of railway developments. It is responsible quality, programming delays, budget over-runs, environ-
for planning future railway expansion to support the con- mental pollution and prolonged contractual disputes.
tinued population growth and economic development of Therefore, efforts have been devoted to studies to investi-
the Territory. gate various methods for mitigating the impact arising
The other departments of ETWB include Drainage Ser- from these risks [20,19,21,22].
vices Department (DSD), Territory Development Depart- A number of studies have been undertaken worldwide to
ment (TDD), Water Supplies Department (WSD), and identify the risks that affect the performance of public sec-
Electrical & Mechanical Services Department (EMSD). tor projects for example, [23–34]. According to these stud-
DSD is mainly responsible for sewage, Drainage, and Har- ies, risks affecting public sector projects can be grouped
bor Area Treatment projects [15]. TDD coordinates the into the following major categories:
various governmental departments and utility companies
and oversees the engineering design and construction  Project-related risks: These risks include cost and time
works on land formation and infrastructure of the develop- overruns, poor contract management, contractual dis-
ment areas including new towns, townships, and new major putes, delays of tendering and selection procedures,
urban development areas [16]. WSD is responsible for poor communication between project parties.
planning and management of water resources and water  Government-related risks: These risks consist of inade-
supply systems. Its activities include designing and con- quate approved project budgets, delays in obtaining per-
structing waterworks projects, operating and maintaining missions, changes in Government regulations and laws,
of water supply and distribution systems, controlling the lack of project controls, administrative interference.
quality of water supply to customers, providing customer  Client-related risks: These risks include inadequate pro-
services and enforcement of the Waterworks Ordinance ject budgets, poor project brief, variations in project
[17]. EMSD plays an important role to deliver reliable specifications, delays in the settlement of contractor’s
and cost effective electrical, mechanical, electronic engi- claims, lack of project control.
neering and building services to government departments  Design-related risks: These risks represent inadequate
and public institutions, and provides an effective regulatory soil investigation, delays in design, ambiguities and
framework to ensure the safety of the public in using elec- inconsistencies in design and design changes.
trical, mechanical and gas engineering facilities [18].  Contractor-related risks: These risks include inadequate
estimates, financial difficulties, lack of experience, poor
1.2. Examination of the typical risks in implementing public management, difficult in controlling nominated
sector projects subcontractors.
 Consultant-related risks: These risks represent lack of
The process of delivering PSPs involves distribution of experience, performance delays, poor communication
responsibility and authority across a broad range of partic- with other project parties.
ipants. This process has been generally characterised by the  Market-related risks: These risks include increase in
review of multiple objectives including quality perfor- wages, shortages of technical personnel, materials infla-
mance, public satisfaction, financial return, environmental tion, shortage of materials, shortage of equipments
performance and safety performance. Baldry [19] identified required.
a number of features embodied in committing to public
sector projects, such as that the execution of the projects It can be seen that many of these risks exist in the early
is rarely intended as a mean to realise a pure financial stages of project implementation when project planning
reward or speculative gain; that project function is invari- and designing are undertaken. This is because of the conse-
ably to support an operational activity or to meet a service quences that could possibly arise from improper planning
of benefit to a large body of consumers. Baldry [19] further and designing. Consequences will be much more costly to
states that the risk impacts extend beyond straightforward resolve in later stages of the project than those errors which
financial damage into operational disturbance, loss of ser- arise solely from construction activities. It is in this light
vice or amenity, user dissatisfaction, and disruption of that the paper proceeds to establish a framework for PPPs
strategic planning processes; and that success criteria are in risk mitigation in public sector projects.
L.-Y. Shen et al. / International Journal of Project Management 24 (2006) 587–594 591

1.3. A descriptive framework for public private partnerships contractors and designers in PPP consortia have an
in risk mitigation incentive to work together at an early stage to decide
the best way to deliver the required service over the con-
PPPs are a recent extension of what has now become tract life. They are encouraged to take a longer term
well known as the ‘new public management’ agenda for view of the design and construction. This results mini-
changes in the way public services are provided [35]. Under mum life cycle cost other than only construction cost
this procurement, the private sector is encouraged to coop- and ensures that less design changes occur during the
erate with government to take part in the provision of pub- construction process [41].
lic services. The success of PPP arrangements in delivering  PPPs arrangements could work through better under-
public sector projects attracts interest in terms of the standing of discovering ways of improving their opera-
understanding of the means of risk mitigation during pro- tions [42]. Therefore, PPPs establish synergistic
ject implementation [36–38,22]. The reasons are multiple relationships to manage risks effectively in the provision
and examples include as follows. of public services. PPPs, in effect, show an effective
organisational arrangement on collaborative form.
 The PPP consortium is responsible for investment capi-
tal and services over a long period. A longer time period A switch from traditional public procurement methods
places pressure on the theme to manage risk factors to infrastructure provision under a PPP arrangement
more effectively but also to provide a long term period implies that the single role of government (as a project
of planning and operation by which to develop skills manager) is changed to a multiple role (as a project man-
and introduce control processes. The funding-provider ager, inspector, customer, and partner). These changes
will also scrutinize the consortium’s plans for the project may mitigate the government and client-related risks, such
carefully before finalising the financing arrangements. as increased investment requested by client, unrealistic con-
This pre-contract scrutiny of PPP projects by the exter- tract durations being imposed by client and clients’ improper
nal fund-provider is an important factor which increases interference during the construction phase. Thus, paper
the likelihood of PPP projects being delivered on time proceeds to apply the above-described framework to ana-
and within budgets [39]. lyse a PPP project in recreational sector in Hong Kong.
 PPP may be considered as an effective way to solve the
problem of insufficient capital provided for public sector 1.4. Case study on public private partnership in Hong Kong
projects. Private capital absorbed into providing public Disneyland theme park
services can mitigate the fiscal difficulties of government
department, which may reduce the major risk factors of Hong Kong Disneyland (HKDLD) theme park is a pub-
delay in progressing payment by clients [8,36,40]. lic sector project procured through PPP to provide recrea-
 Payments are always fixed in the PPP contract and do tional facilities for general public in Hong Kong and
not usually start until the project has been passed for contribute to the development of the Hong Kong economy.
use and met requirements. The requirements encourage In the process of recovery of the economy from Asian
the accurate assessment of project costs and completion financial crisis in the late 1990s, the Hong Kong govern-
of the construction project as soon as possible in order ment entered into an agreement with the private sector,
to receive payments. This payment mechanism may The Walt Disney Company (WDC) on the development
reduce most of contractor-related risks, such as contrac- of Phase 1 of Hong Kong Disneyland (HKDLD). The
tors’ unrealistic tenders, poor planning and scheduling 310-acre park is located at Penny’s Bay on Lantau Island
at pre-construction stage, improper construction meth- of Hong Kong and consists of one Hong Kong Disneyland
ods adopted by the contractor [36,22]. theme park, two hotels (Disneyland Hotel and Disney’s
 PPP consortium members are committed to a long-term Hollywood Hotel), and retail, dining and entertainment
relationship among each other. In order to achieve the facilities.
quality of service required there has to be greater degree The Hong Kong Government signed the final contract
of cooperation among the consortium members. This documents with the Walt Disney Company on December
can result in reductions of the risks of poor communica- 10, 1999 to facilitate opening of Hong Kong Disneyland
tion among contractor, designer, consultant and client. in 2005. By the agreement between Hong Kong Govern-
Under traditional procurement, the constructors and ment and WDC, a joint-venture company, the Hong Kong
designers tend to work separately, which has led to International Theme Parks Limited (HKITP) was set up to
many problems, such as delays in providing design develop and operate HKDLD [43]. In this partnership, the
information, ambiguities, mistakes, and inconsistencies Hong Kong Government funded the works of land recla-
in design, poor buildability of design and late response mation and other infrastructural works, and the private
from designer to contractor inquires, etc. However, sector was responsible for construction and operation of
PPP encourages better integration between design and facilities. In order to create this theme park resort, about
construction. This integration can mitigate the risks that 2 million cubic meters of topsoil have been created to
occur frequently in traditional procurement. Moreover, support the extensive landscaping on the site [43]. The land
592 L.-Y. Shen et al. / International Journal of Project Management 24 (2006) 587–594

lease will run for 50 years, with right of renewal for a fur- be allocated to either the public or private sectors depend-
ther 50 years. The Government will own 57% of the shares ing on the type of risk and the ability of either sector to
in the company initially, while Disney will own 43% of the control and manage them. The general principle in PPP
shares. risk allocation is that each individual risk is identified
There is therefore a need for the Hong Kong Govern- and then allocated to the party best be able to manage that
ment to closely monitor the performance of HKITP to risk. This principle has been adopted in managing risks in
ensure the timely delivering of the park. In the develop- implementing HKDLD project, and the allocations of
ment stage, given the extensive infrastructure works identified risks are summarised in Table 2.
involved, a special unit within the Civil Engineering
Department (CED), known as the Special Duties Office  R-1 – Site acquisition risk concerns both land acquisi-
(SDO), was set up to assume the responsibility for the over- tion and protecting or demolishing existing buildings.
all delivery, coordination and monitoring of all relevant According to the Agreement between the Hong Kong
infrastructure works at the HKDLD site and other relevant Government and the WDC, the government has the
developments in the vicinity of Northeast Lautau. The responsibility to take measures for ensuring the acquisi-
SDO has also the responsibility to select, appoint, supervise tion of the HKDLD site and for protecting the site from
and monitor the Government’s consultants, to employ con- visual intrusion and incompatible land uses in surround-
tractors, and to liaise with various Government depart- ing areas. The private partner is responsible for the pro-
ments, utility companies, the rail operators and HKITP tection or demolition of existing buildings or facilities on
[44]. As the HKDLD project involved a large number of the site. Thus, this risk is shared between the two parties.
complex structural submissions with unconventional  R-2 – The risk of unexpected underground conditions is
designs, a special team in the Government’s Building allocated to the private partner. The private partner is in
Department was set up to undertake the additional respon- the better position to undertake site survey particularly
sibilities for overseeing the design works to ensure meeting on the underground conditions, such as any existing
the target completion date. piles, the earth conditions, etc.
The Disneyland Theme Park is one of the landmark pro-  R-3 – The risk of the pollution to the land and surround-
jects financed through PPPs in Hong Kong. The theme ings is shared between the government and the private
park project is expected to generate many thousands of partner. This risk associates with the operation of the
new jobs. To the Disney, it has gained access to the world’s project HKDLD and the overall planning of the project.
freest economy in order to do business. The project will Therefore, the risk is shared between the two parties.
further promote Hong Kong’s tourist industry and will  R-4 – The risk of land reclamation concerns with time
enhance the quality entertainment for the local community. delay, cost overruns and other technical problems. The
The government anticipated that the park ‘‘will generate private partner is responsible for the completion and
substantial long-term economic returns to the territory’’ construction of land reclamation, including associated
and ‘‘is a key strategic infrastructure component of a infrastructure and facilities.
renewed and reinvigorated motivation to strengthen and  R-5 – Development risk concerns the loss in the project
consolidate Hong Kong’s position as a must-see tourism development stage, for example, the waste of resources
destination’’ [43]. committed by either the government or private partner.
This risk is shared between the two parties.
1.4.1. Risk identification
Much of the risks of a PPP project come from the com-
plexity and uncertainty of the arrangement in terms of
financing, taxation, technical details, market conditions Table 2
Risk allocation between the government and the private partner in
etc and changes over the duration of the project [39]. In
HKDLD
the project HKDLD, the risks affecting the project perfor-
Risk factors Public sectors Private sectors
mance are identified under the following 13 catalogues: site
acquisition risk (R-1); unexpected underground conditions R-1 Responsible Responsible
(land acquisition) (existing buildings)
(R-2); pollution to the land and surroundings (R-3); risk of
R-2 Responsible
land reclamation (R-4); development risk (R-5); design and R-3 Shared Shared
construction risks (R-6); changes of market conditions (R- R-4 Responsible
7); inexperienced private partner (R-8); financial risks (R- R-5 Shared Shared
9); operation risks (R-10); industrial action (R-11); legal R-6 Responsible
R-7 Shared Shared
and policy risks (R-12); force majeure (R-13).
R-8 Responsible
R-9 Shared Shared
1.4.2. Risk allocation R-10 Responsible
The appropriate allocation of risks between the public R-11 Responsible
and private sectors is a key requirement for the achieve- R-12 Responsible
R-13 Shared Shared
ment of value for money in PPP projects. The risks should
L.-Y. Shen et al. / International Journal of Project Management 24 (2006) 587–594 593

 R-6 – The private partner is responsible for the risk of ple project objectives and mitigating project risks. By
design and construction, which concerns cost and time using PPP approach, the private partner’s skills in manag-
overruns, poor quality performance, poor safety mea- ing an enterprise and controlling the efficiency and effec-
sures, and other risk factors relating to design and con- tiveness in running a business can be brought to improve
struction works. the effectiveness in mitigation of operation risks in running
 R-7 – The risk of market changes is considered consid- public sector projects. For example, by partnership, the
erably higher in this project. Market conditions such government concerned and the private partners have suffi-
as the provision of facilities, population, inflation, tech- cient time to develop project specifications before the con-
nologies, are dynamic, and their changes can signifi- struction of a project, thus mitigating the design errors
cantly affect the business performance of the project, which could become very costly during the construction
HKDLD. Therefore, it is appropriate that this risk is stage. By referring to the practice in Hong Kong, this paper
shared between the government and the private partner. examines the nature of public sector projects and the major
 R-8 – The government has to assume the risk of choos- risks in the implementation of public sector works. These
ing inexperienced private partner who may not be suit- major risks are identified as project-related, government-
able, or incompetent, or has financial difficulties. related, client-related, design-related, contractor-related,
 R-9 – The implementation of HKDLD involves huge consultant-related, and market-related risk factors. When
amount of financial resources contributed by both the PPP mechanism is adopted in implementing public sector
private partner and the Hong Kong Government. The projects, these risks can be controlled and managed effec-
project is financed by a mixture of debt and equity. There tively by allocating them between the government and the
are uncertainties about the returns from these financial private sector.
commitments due to the changes in interest rates, The example of HKDLD demonstrates how various
exchange rates, ownership and other factors. It is agreed major risks in committing to a PPP project are allocated
that this type of risks is shared between the two parties. or shared effectively between the government and private
 R-10 – There are risks during the operation of the pro- partner. In this typical PPP project, it is found that alloca-
ject, which will affect the profitability of running the pro- tion of site acquisition risks, inexperienced private partner
jects, such as the changes in technologies, variations in risk and legal and policy risks to the public sector is appro-
materials or components for maintaining and repairing priate. Also, allocation of the design and construction
the facilities. These risks are called operation risks and risks, operation risks and industrial action risks to the pri-
normally borne by the business that is responsible for vate sector, and sharing of development risks, market risks,
the day to day maintenance and operation of the project. financial risks and force majeure between the two parties is
Thus, this type of risks is allocated to the private partner. important. These results present valuable lessons for both
 R-11 – The risk of industrial action is usually interpreted the practitioners and researchers in application of PPPs
as on strike among the employees who carry out various to manage risks in delivering public sector projects in other
duties or business activities during building and running countries and regions.
the project. This risk associates with the management
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