Risk in Private Finance Initiative Projects: A Public Sector Perspective

D. Asenova, Matthias Beck

Research output: Chapter in Book/Report/Conference proceedingChapter (peer-reviewed)

Abstract

The management of public sector risk is increasingly seen as a priority area of UK government policy. This has been highlighted recently by the Prime Minister Gordon Brown who stated that “the issue of public risk is one of the most challenging areas of policy-making for any government” (Strategic Risk, 2008). In response to these challenges, the UK Prime Minister has appointed a new body - the Risk and Regulation Advisory Council (RRAC) which is tasked with improving the way risk to the public is understood and managed. One area of particular concern with regard to the governance of public sector risks involves projects procured via the Private Finance Initiative (PFI). These projects involve long-term contracts, complex multi-party interactions and thus create various risks to public sector clients. Today, most PFI actors acknowledge the potentially adverse effects of these risks and make an effort to prevent or mitigate undesirable results. As a consequence, issues of risk allocation, risk transfer and risk management have become central to the PFI procurement process. This paper provides an overview of the risk categories and risk types which are relevant to the public sector in PFI projects. It analyses risk as a feature of uncertain future project-related events and examines potential pitfalls which can be associated with PFI risk management on the basis of a case study of a high-profile PFI hospital in Scotland. The paper concludes that, despite the trend towards diminished risk profiles during the operational phase, the public sector continues to be exposed to significant risks when engaging in PFI-based procurement.
Original languageEnglish
Title of host publicationUnderstanding Risk
Subtitle of host publicationContributions from the Journal of Risk and Governance
EditorsMatthias Beck
Place of PublicationNew York
PublisherNova Science Publishers
Pages161-186
ISBN (Print)978-1-62618-686-6
Publication statusPublished - 2013

Bibliographical note

This is an updated and revised version of an article originally published in the Journal of Risk and Goverance

Keywords

  • Risk management
  • Financial risk
  • Risk
  • Corporate governance

Fingerprint Dive into the research topics of 'Risk in Private Finance Initiative Projects: A Public Sector Perspective'. Together they form a unique fingerprint.

Cite this