Title: Critical uncertainty factors for efficient allocation of demand risk in privately financed public infrastructure projects in Australia

Authors: Xiao-Hua Jin, Chyi Lin Lee, Guomin Zhang

Addresses: School of Architecture and Building, Faculty of Science and Technology, Deakin University, Geelong, Victoria 3217, Australia. ' School of Economics and Finance, The University of Western Sydney, Locked Bag 1797, Penrith South D.C., New South Wales 1797, Australia. ' School of Civil, Environmental and Chemical Engineering, College of Science, Engineering and Health, RMIT, GPO Box 2476, Melbourne, Victoria 3001, Australia

Abstract: Risk allocation in privately financed public infrastructure projects, which are mainly referred as public-private partnership (PPP) projects, is a challenging job due to the nature of incomplete contracting. Among the various risks that may eventually materialise, demand risk is one of the major challenges that PPPs face. Choosing a risk allocation strategy could be viewed as the process of deciding the proportion of risk management responsibility between public and private partners based on a series of characteristics of risk management service transaction in question. These characteristics are more or less related to the various uncertainty factors. In this study, various uncertainty factors have been examined in order to achieve efficient allocation of demand risk and minimise risk management-related costs in a long-term view. Critical uncertainty factors have been identified through an industry-wide survey in Australia. Future research directions are also set out.

Keywords: uncertainty; risk allocation; demand risk; transaction cost economics; public-private partnerships; PPP; Australia; private finance; public infrastructure projects; risk management.

DOI: 10.1504/IJPOM.2011.042031

International Journal of Project Organisation and Management, 2011 Vol.3 No.3/4, pp.243 - 257

Received: 03 Sep 2009
Accepted: 16 Aug 2010

Published online: 21 Aug 2011 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article