CE5870​ : ​Infrastructure 
Planning and Management 
​Module Assignment 2 
 
Public Private 
Partnerships 
 

Satwik Gupta 
3rd September, 2019 

 
 

Content 
1. Introduction 
2. Types of Risks 
3. Case Studies 
4. Conclusion 

Introduction 
Infrastructure is the back bone of economic development of any Nation. There has been a 
special impetus on infrastructure development due to its strong correlation with economic 
development. The correlation of investments in rail, road and airport infrastructure to GDP is 
higher than 0.9. India needs to spend 7-8% of its GDP on infrastructure which translates to annual 
investment of $200 billion currently. However, India has been able to spend only $100-$110 
billion till now, leaving a deficit of $90 billion.  

To overcome and cater to these issues, the PPP’s have been on a rise. Public-private partnerships 
(PPPs) are a mechanism for government to procure and implement public infrastructure and/or 
services using the resources and expertise of the private sector. Where governments are facing 
ageing or lack of infrastructure and require more efficient services, a partnership with the private 
sector can help foster new solutions and bring finance. The only issue is that the risks associated 
with them are also many and at times very high. The financial crisis of 2008 onwards brought 
about renewed interest in PPP in both developed and developing countries and since then there 
has been a periodic motion in the number of PPPs in play, on the rise in the current phase. 

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Types of Risks 
Risks can be classified as follows 

1. Known Risks : Which we know from prior experience 

2. Known-Unknown risks : Which we know from past experiences but can’t do anything 
about them 
3. Unknown : Which we don’t have a past experience of and hence cannot be managed, 
however a contingency plan in place helps reduce its effects  

Based on the phase of the project, the risks can be classified as 

Phase of Project  Types of Risks 

Development phase  ● Planning and environmental process 

● Political will 
● Regulatory 
● Site 
● Permitting 
● Procurement 
● Financing 

Construction phase  ● Engineering and construction 

● Changes in market conditions 

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Operation phase  ● Traffic 

● Competing facilities 
● Operation and maintenance 
● Appropriation 
● Financial Default Risk to public agency 
● Refinancing 
● Political 
● Regulatory 
● Handback 

A brief about some of the risks is as follows 

 
1. Planning and environmental process​ : Planning is central to any project but often a not 
so seriously side of the project. Improper planning leads to confusion maongst the 
stakeholders about the time and cost of completion of project. 
 
If a project is kicked off without the permission of the Environment Dept, it can suffer 
significant delays, cost overruns and in some cases termination of the project too.  
 
2. Political :​ Political stability and will can make or break a project. It has been obe=served 
that the projects which have a start adn end date within the ruling time of the ruling party 
have a higeher success rate. 
 
3. Regulatory ​: A clear pre-requisite to any PPP is a PPP legislation. Regulatory risks arise 
when a strong PPP regulation is not in place. PPP regulations should provide sufficient 
guidance, striking the right balance between flexibility and certainty. This will encourage 
private sector interest. 
 
4. Procurement ​: It refers to the risk of flawed or failed procurements. This includes 
a. fewer proposers than anticipated, 
b. affordability threshold exceeded by lowest bid,   
c. procurement award successfully challenged,  
d. noncompliant or low-quality bids submitted. 
 
5. Financing ​: This is the biggest risk in the project and also one of the most integral part of 
the project. An issue in this can lead to a lot of cost overruns and time overruns if the 
project’s financing party is in doubt of the project. 
 
6. Engineering and Construction​ : Engineering risk encompasses several sub-risks  
a. Design risk : Design flaws can lead to delays and cost increases, as well as 
environmental and safety issues. 
b. construction cost risk : Varies due to the uncertainty in labour and material costs   
c. latent defect risk : Risks after the completion of the project 
 
7. Operations and Maintenance​ : The operations costs are generally predicted in the 
beginning. However these might change with the change in the inflation or due to a lot of 
other factors. Also insufficient input into the system may also lead to an underutilisation of 
the project which may again hamper the efficiency of the project. 
 

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8. Default ​: This generally occurs if the project is not going good and the revenue generated 
by the private fellow is much below their expectations. In such circumstances the only 
alternative left for the private fellow is to terminate the project. To avoid these, the public 
entity should study the project cycle and if necessary find and approve alternatives for 
revenue generation. 
 
9. Handover​ : Handover is the last aspect in a PPP. If at the time the project is not in a good 
state then effectively the project has failed since in a few years’ time it will again be of no 
use to the public. Also at the time of handover the private party should have gained 
enough revenue to overcome the investments in the project failure to which will lead to 
losses. 

Case Studies 

Examples of PPPs   
Stage  Project Examples of  
where problems were  Learnings 
Activity  encountered 
Of  successful PPPs 
Projects 
    Timarpur Integrated solid  Vadodara Halol Toll  Prior due diligence 
  waste management  Road project:​Incorrect  studies of technical 
Comprehensive 
project​: Detailed technical  estimation of & legal implications. 
Project  due diligence 
studies, financial & risk  projected traffic Realistic Traffic 
Preparation  Studies & Robust 
evaluation, obtaining  resulting in increased  estimates. 
Traffic / Market 
regulatory & statutory  revenue Risk. 
Projections 
approvals were 
done well in advance. 
      Hyderabad Speculative
    Metro  bids should be 
    project:C​ ommercial  avoided & 
Dealing with  utilization of land along  terminated; Fresh 
Procurement 
Speculative  with metro project led to  bidding should be 
Bids  wide divergent called for. 
bids. Greater
incentive to 
complete real
estate development at 
the cost of 
metro. 
      Hyderabad Metro  Adequate due 
project: M​ aytas Metro  diligence of 
Importance of 
was badly affected due  Experience & 
Lead Consortium 
to issues faced by its  expertise of Lead 
Member/ 
promoter– Satyam consortium member 
Promoter of 
Computer Services.  or promoter. 
Concessionaire 
Project failed to 
achieve financial closure. 

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    Hyderabad Metro project​:  Delhi Gurgaon  Completing land 
Government handover  expressway project:​   acquisition prior to 
Development  Handling of  
90% of the land within 120  difficulty in acquiring the  Project Procurement. 
LandAcquisition  days from signing of the  land impacted the 
agreement.  overall project schedule. 
    Alandur Sewerage Project:​     A single interface for 
Key approvals, including  coordination of all 
Streamlining of 
road cutting, shifting of  approvals to prevent 
Approvals & 
services & environmental  delays. 
Clearances 
clearances were taken in 
advance. 
  Environmentally  Vadodara Halol Toll Road    PPPs have an 
& Socially  project​: Intense public  environmentally
responsive  consultations were carried  and socially
development  out. responsive 
framework:  Bypasseswere introduced  development 
Learning:  at various critical  framework. 
locations. 
    The  Vadodara  Halol  Toll    PPP projects to be 
Road:D ​ eep  discount  financially 
Financing 
bonds  with  an  option  of  independent; 
Innovation 
take-out  financing;  Long  Minimize reliance on 
term  loans  as  a  part  of  its  government grants 
financing  or 
structure.  schemes. 
    Amritsar  Inter-state  Bus    Create
  Favourable  Terminal  favourable 
Operations  Operating  project:R​ eduction  in  operating 
Environmnt  concessionaire’s  revenue  environment for 
risk.  private sector
to 
function optimally. 

Conclusion 
Infrastructure projects are a complex phenomenon, but most overruns are foreseeable and thus 
avoidable. These arise due to a lack of professional and forward-looking risk management 
players and as a result the projects go into vain. A good risk-informed project will involve the 
following: 

1. Mitigation and Contingency tools for the risks if faced 

2. Comprehensive conceptual and regulatory framework inclusive of risk 

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3. Increase in transparency in the overall processes 

4. Adequate risks allocation matrix and ownership 

These few principles will enable in a very efficient and hedged project, thus encouraging the 
private players too to invest more in them and thus generate more revenue and at the same time 
help the economy grow. 

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