Risk Management in PPP Projects: Deakin University Master Thesis

This thesis investigates risk management in Public-Private Partnership (PPP) projects, aiming to develop a knowledge-based strategic system for risk identification and management. The research explores the background of PPP projects, relevant risks, and the importance of knowledge management. The study employs a qualitative research method, reviewing literature to identify and analyze risks, including fiscal, bidding, and sustainability risks. The thesis examines risk allocation and mitigation strategies, with a focus on China's PPP projects and a conceptual framework for monitoring PPP strategies. The discussion chapter focuses on knowledge risk management, the SECI model, and PPP knowledge base. The conclusion summarizes the research findings and offers recommendations for future research, contributing to the understanding of risk management in PPP projects within the construction industry. The report also includes details on the research methodology, findings, and discussions, concluding with contributions to knowledge, limitations, and recommendations for further research.

RISK MANAGEMENT IN PPP PROJECTS
By
Your Name
Submitted in fulfillment of the requirements for the degree of
Master of Construction Management
Deakin University
Date
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DEAKIN UNIVERSITY
CANDIDATE DECLARATION
I certify that the thesis titled
Risk Management in PPP Projects
Submitted for the degree of
Master of Construction Management
is the result of my own work and that where reference is made to the work of others due
acknowledgment is given.
I also certify that any material in the thesis which has been accepted for a degree or diploma
by any university or institution is identified in the text.
Full Name:
Signed ..................................................................................……………….
Date......................................................................................……………….
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Acknowledgments
The preparation of this thesis is a demanding task that calls for maximum dedication and
cooperation from various significant people and institutions. Listing all of them might be
impossible. First and foremost I thank the Almighty God for having granted me the life and
energy to enable me to get to this far. May power and glory go back to Him who dwells
above. I would like to also thank my supervisor(s) who dedicated a lot of the quality time and
perseverance towards the preparation of this thesis proposal. I am equally humbled to thank
them sincerely for every positive immediate responses, guidance, and encouragement that has
seen me get to this level of this task this time. May I also thank the University as well for their
faithful commitment and moral support.
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ABSTRACT
The aim of this thesis report is to develop a risk identification and management strategic
system in PPP projects using a knowledge-based approach. The initial part of the report
involves the identification of the risk from the various works of literature followed by the
proposed risk allocations as well from the different works of literature which are compared
against each other. Besides, another very fundamental part of risk management which is risk
mitigation strategy is as well comprehensively discussed.
The focus of the risk management of PPP projects is not just on projects done in China as is
the case study but also on the management of risks that often occurs in PPP projects across
the world. The main focus of the PPP projects will be on the projects of infrastructure.
The qualitative method of data collection and analysis are adopted as the scientific method of
research.
Knowledge risk management is brought to attention in the discussion chapter where it is
added to risk management in PPP projects. The two main rational ways of dealing with risks
discussed in this report are the SECI model as well as PPP knowledge base. These models are
able to handle numerous risks as well as the knowledge gaps beside enhancing
communication and understanding among the various stakeholders. The conclusion section
provides a summary of the results and the discussion besides offers recommendations for
future research.
Keywords: PPP, risk, knowledge-based, mitigation, China
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TABLE OF CONTENTS
1 Contents
1 INTRODUCTION........................................................................................................1
1.1 Introduction.......................................................................................................1
1.2 Background........................................................................................................1
1.3 Problem Statement.............................................................................................2
1.4 Research Questions...........................................................................................2
1.5 Research aim and objectives.............................................................................3
1.6 Research Methodology......................................................................................3
1.7 Thesis structure..................................................................................................3
2 THEORETICAL FRAMEWORK...................................................................5
2.1 Background of Public-Private Partnership Project............................................5
2.2 Worldwide Context about Private Public Partnership Projects...................................7
2.2 Relevant Risks in PPP Projects.........................................................................8
2.2.1 Fiscal Risks: Contingent Liability and Fiscal Investment Risk.........................9
2.2.2 Fiscal Management or Fiscal Investment Risk................................................10
2.2.3 Residual Value Risk........................................................................................11
2.2.4 The Bidding Risk-Winner’s Curse or Opportunistic Renegotiation Risk.......12
2.2.5 Public Acceptance Risk...................................................................................14
2.2.6 Sustainability Risk...........................................................................................14
2.2.7 Foreign Exchange Risk....................................................................................15
3 RESEARCH METHODOLOGY...................................................................17
3.1 Introduction.....................................................................................................17
3.2 Research Method.............................................................................................17
3.3 Data collection.................................................................................................17
3.4 Data analysis....................................................................................................18
3.5 Summary..........................................................................................................18
4 FINDINGS.......................................................................................................19
4.1 Knowledge Management of PPP Projects.......................................................19
4.2 Types of Knowledge and Creation..................................................................19
4.3 Knowledge Management in PPPs...................................................................19
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4.4 Risk Management in PPP Projects..................................................................20
4.4.1 Risk Types in PPP Projects.............................................................................20
4.4.2 Managing Risks in PPP Projects.....................................................................21
4.5 Conceptual Framework to monitor the strategies governing PPP Projects.....22
Risk identification...........................................................................................................22
Risk analysis and assessment..........................................................................................23
Risk evaluation and assessment.......................................................................................23
Risk treatment..................................................................................................................23
4.5.2 Risk Mitigation................................................................................................25
4.6 Specific Risk in China PPP Projects...............................................................26
5 DISCUSSION..................................................................................................28
5.1 General Discussion..........................................................................................28
5.2 Risk Identification, Allocation and Mitigation................................................28
5.3 Using BIM in supporting risk Management in PPP Projects..........................30
5.4 Knowledge Risk Management of PPP projects...............................................31
6 CONCLUSION................................................................................................34
6.1 Contributions of the Research to Knowledge..................................................34
6.2 Research Limitations and Future work............................................................34
6.3 Recommendations for Further Research.........................................................35
7 REFERENCES................................................................................................36
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LIST OF TABLES
Table 1: Transportation PPP Projects worldwide ………………………………6
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LIST OF FIGURES
Figure 1: The PPPs Hub……………………………………………………..…………………6
Figure 2: Different Levels of Private Sector Engagement in PPP Projects................................7
Figure 3: Identification of Risks by type…………………………………………...………….9
Figure 4: Risks in the life cycle of PPP projects………………………………..
……22
Figure 5: Life Cycle Consideration in PPP Risks………………………….………………....24
Figure 6: Risk Allocation Model……………………………………………………………..25
Figure 7: Steps in PPP Project Implementation Process……………...………………………32
Figure 8: Risk Management Process in PPP Projects…………………..…………………….33
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LIST OF APPENDICES
Appendix 1: Transportation PPP Projects worldwide……………………………6
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1 INTRODUCTION
1.1 Introduction
This chapter aims at building the skeletal outline of the main question of research in this
study. The research question of this study is: what should be part of the risk management in
Public-Private Partnership projects and how should such be included.
The background of the study as well as an introduction to Public-Private Partnership will be
presented initially before they are followed by the purpose, research aim and objectives, a
brief introduction to Public-Private Partnership and then the limitations of this thesis report.
An outline of the later chapters will close the thesis chapter (Waring, Currie & Bishop, 2013).
The focus of this report will primarily be on the adoption of risk management in Public-
Private Partnership projects that are related to infrastructure. Public-Private Partnership
projects are those projects which adopt a Public-Private Partnership model in the full life
cycle of the project.
1.2 Background
For numerous years now, Public-Private Partnership model has been in use in the construction
sector. Just like any other initiative or model, Public-Private Partnership has two sides: the
merits and demits. Alongside the praise and applause for its benefits, the presence of
controversy and blame are as well vivid and real for its shortcomings (Sharma and Bindal,
2014, p. 1271). Owing to the acute financial crisis that was experienced in the year 2008, a
significant amount of interest has been on the verge of increase in carrying out Public-Private
Partnership projects in most of the countries around the globe.
Such a scenario is attributed to the inadequacy of funds as well as the realization of the
importance of the investments of the private enterprises by the various governments of
countries (Grimsey and Lewis, 2002, p. 110). The same situations are as well experience in
China, thereby prompting the Chinese government to actively engage in the encouragement of
the construction of Public-Private Partnership projects.
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As PPP projects have managed to attract more attention than ever, a consideration of the risk
management of PPP projects is worth being considered in order to eliminate doubts of
governments. As a result, it is of importance to conduct and analysis as well as control of the
risks of PPP projects and illustrates the chances of bringing them down. References will be
made to global scientific researches related to PPP or PPP projects in some of the nations or
all over the world followed by certain specific scenarios in the field of the construction
industry of China (Yeung, et al 2010, p. 940).
With the increase in the current clause ‘knowledge risk management,’ that illustrates the
interaction of risks management and knowledge management, the chances of a relationship
between risk management and knowledge management have been justified.
1.3 Problem Statement
The main purpose of this study is to examine the risk management in which the greatest
important duo parts are risk allocation and risk mitigation strategy of PPP projects (Perry &
Hayes, 1985 p. 500). In a bid to attain this objective, an elaborate search into the existing
works of literature will be conducted and the findings of that will be the return in the chapter
that discusses the findings. One more major purpose of the study is the knowledge risk
management of Public-Private Partnership projects that are to be discussed later in the
chapters.
Yet another cause of desire in the writing of this report borrows from the reports that there are
implementations at higher frequencies of more Public-Private Partnership projects in China,
offering an excellent opportunity to get to understand this model more elaborately by
performing this thesis.
1.4 Research Questions
The research questions of this thesis are:
 What should be part of the risk management in Public-Private Partnership projects?
 How should such parts be included?
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1.5 Research aim and objectives
The main aim of this thesis project is to develop a risk identification and management
strategic system in PPP projects using a knowledge-based approach. Risks are inherent in all
projects and they arise as a result of uncertain future outcomes which can have direct impacts
on the whole project (Perry & Hayes, 1985 p. 500). The risk allocation to the contract parties
and its management which hence cause a PPP design that establishes an element of the
business project.
This will be achieved through the research of the following objectives:
1. To analyze the major risks which occur both locally and internationally in the PPP
projects
2. To develop a knowledge-based approach in establishing the assessment of risks in PPP
projects
3. To develop a case study on PPP projects (Warner & Sullivan, 2017)
4. To develop a conceptual framework which will monitor the strategies that will govern
Public-Private Partnership in the construction industry
1.6 Research Methodology
In a bid to attained the aforementioned aims and objectives, the research, secondary data will
be adopted in conjunction with the literature review
1.7 Thesis structure
Chapter 1 Introduction provides an overview of the master among them the background, the
purpose of the report, research questions, research aims and objectives, research methodology
which describes the approach that will be used in attaining the aims and objectives of the
study.
Chapter 2 Literature Review provides a literature of the previous works on introduction to
PPP projects, worldwide context about PPP projects risks identification in PPP contracts and
3