Risks, Contracts and Private Sector Participation in Infrastructure
Journal of Construction Engineering and Management, Vol. 137, No. 11, 2011
16 Pages Posted: 31 Jul 2012
Date Written: May 3, 2010
This article examines how risk is reflected in infrastructure regulatory contracts, using examples from water utilities to illustrate key points. Partnerships between public and private sectors in capital intensive network services require risks to be assigned to the contractual party that is better able to mitigate them or to bear them. After identifying risks that must be addressed in infrastructure contracts, their classification, allocation, and impact are presented along with the measures to minimize risks. We analyze two contracts in the water sector in Portugal. One arrangement corresponds to a public-private partnership (PPP) of purely contractual type (concession arrangement) and the other to an institutionalized PPP (mixed company). We conclude that risk is a key issue in contracts with the private sector: an appropriate allocation of risks is a necessary condition for successful contracts.
Keywords: Contracts, Private Sector Participation, Public-Private Partnerships, Risks, Water Utilities, Infrastructure
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