RISK ALLOCATION PREFERENCE IN PUBLIC-PRIVATE PARTNERSHIP INFRASTRUCTURE PROJECTS IN NIGERIA

I.Y. Mohammed¹; K. Bala² and S.U. Kunya³

^1&3Building Programme, School of Environmental Technology

Abubakar Tafawa Balewa University, Bauchi –Nigeria

²Department of Building, A.B.U. Zaria – Nigeria

ABSTRACT

The traditional methods used to measure project success in the construction industry are ‘the iron triangle´ of time, cost and quality. These criteria are no longer sufficient as other factors related to project sustainability are being demanded. Sustainable procurement policies require that projects provide social and economic gains to host communities. Construction works procured using public private partnership arrangement (PPPs) are more risk prone than those procured using other forms, primarily due to the lengthy concession period and the multi-parties involved in the arrangement. In Nigeria, researches on the assessment of the performance of projects procured using PPP are few due to the novelty of the approach. Many projects are still at pre-construction and construction stages whilst few are at the operation stage. It is important for the public and private sectors to establish effective risk allocation strategies for public-private partnership (PPP) projects in order to achieve a more efficient process of contract negotiation and reduce the occurrence of dispute during the concession period. This paper aims to identify the preferred risk allocation in PPP projects in Nigeria. A questionnaire survey was used based on identified risks. The results show that the public sector preferred to retain most political, legal and social risks, and share most micro level risks and force majeure risk; while the majority of micro level risks were preferred to be allocated to the private sector. The analyses of risk allocation preference among the respondents indicate that the public sector was most able to transfer the PPP risks to the private sector. 55% of the respondents exhibited the greatest degree of support for the public sector to retain the macro level risks. All respondents agreed that private investors should take a more active role in managing the micro level risks. 30% of the respondents considered that majority of the micro level risks should be shared equally between the public and private sectors, while 15% of the respondents indicated that the private sector should take a more active role in managing the micro level risks. The study provides investors a better understanding of risk preferences among the stakeholders so that they could adjust their strategies according to the specific situation and achieve better value for money in running their PPP projects.