Public-Private Partnerships: Implications from Policy Changes for Practice in Managing Risks

Purpose – This paper investigates the policy changes made towards infrastructure Public-Private Partnerships (PPPs). The purpose of the study is to empirically identify the policy risks associated with the development of PPPs and to assess their impacts on the projects. Design/methodology/approach – A case study of the policy changes that have been implemented for PPPs in China over the past seven years has been undertaken and is presented in this study. The Causal Loop Diagrams (CLDs) are applied to assess and illustrate the potential impacts of the risks as a result of such changes on PPPs. Findings – A sequence of the policy risks, which relate to PPP risk allocation, contract management and implementation, payment and abatement mechanisms and financing, has been identified. It is also found that the identified risks will generate significant but negative impacts on PPPs, leading to an ineffective project delivery, low revenue, poor service quality and even contract breach. Practical Implications – This research provides the private-sector entities that will embark on PPPs with an insight into managing and controlling policy risks over the project’s lifecycle. Originality/value – PPPs have been critical for infrastructure development worldwide. Nevertheless, they have been a controversy, as many of them were subjected to poor outputs. Consequently, a variety of political mechanisms has been implemented to enhance the governance for PPPs. Policy can bring not only benefits, but also risks and, however, policy risks of PPPs with a particular assessment for their potential impacts have received limited attention. Therefore, the study presented in this paper will contribute to the identification and assessment of policy risks within the context of PPPs.