Risk transfer in operational public private partnerships in the education sector

Abstract

Despite risk transfer being deemed a key driver in attaining value for money in Public Private Partnerships (PPPs), plus the substantial resources already committed to PPPs globally, prior studies have tended to focus on PPP procurement, projects in their early stages or on the accounting treatment of PPPs, with limited research being conducted on risk transfer in operational PPPs. There is also a dearth of comparative investigations into risk allocation in PPP and traditionally procured (TP) projects.

Drawing on Principal Agent Theory, Lonsdale’s modified Transaction Cost Economics framework, relational contracting and the relational theory of risk this research sought to address this gap by examining whether risks have been transferred as intended. Planned levels of risk allocation were identified by analysing the procurement documents for a sample of operational PPP and TP schools in NI and ROI. In addition, semi-structured interviews were conducted with key public and private sector stakeholders to capture their experiences and perceptions of risk allocation at the operational stage of PPP and TP school projects.

As anticipated, risks largely remained with the public sector for the TP schools examined. However, as interviewees’ responses regarding risk allocation in PPP schools differed somewhat from the analysis of the procurement documentation and the findings from prior studies, the results of this research challenge the technicist view of risk which contends that it can be transferred and priced. Variation between expected versus actual risk allocation appears to be as a consequence of contract subjectivity and flexibility, which is associated with relational contracting, together with disparities in contract knowledge, one of Lonsdale’s factors. Examples of good practice, recommendations for policy makers and suggested areas for future research were also identified.

Date of Award	Dec 2020
Original language	English
Awarding Institution	Queen's University Belfast
Sponsors	Technological University Dublin
Supervisor	Ciaran Connolly (Supervisor) & Martin Kelly (Supervisor)