Risk allocation as a success factor for P3 infrastructure procurement
When risk is not effectively distributed between public and private partners to an infrastructure project, it can have detrimental consequences, which include increased project costs, delays, and increased public sector exposure.
By AnsaradaTue May 27 2025Industry news and trends, Innovation, Tenders
Impacts of poorly distributed risk in infrastructure procurement
Cost overruns in PPP
Example: Motorways in Greece receive low traffic after the financial crisis
Three motorway projects were financed primarily by toll revenues, however, a severe economic crisis in Greece resulted in a collapse in traffic volumes to around 50% below even the most pessimistic scenarios. Risk was with private partners, who had no influence over traffic flow, and resulted in the suspension of works when funding ceased. A renegotiation of the contracts shifted this risk back to the public partner.
Delay in the delivery of PPP projects
Project design should rely on expert input
Example: Denmark builds a bored tunnel for the Storebaelt link
Despite risk assessments that recommended an immersed tube tunnel, a bored tunnel was procured for the Storebaelt link in Denmark. The decision was made in order to avoid dredging a trench for an immersed tunnel. This decision significantly impacted project outcomes, as the bored tunnel was more difficult to construct than initially estimated.
Although there were challenges during the project to build the East Tunnel, the owner and contractor took a proactive approach to solving problems.
Dynamic risk allocation in P3 infrastructure contracts
Aligning incentives between public agencies and private contractors ensures that projects remain operationally effective over time. As economic, environmental and policy conditions change, risks must be continually reallocated.
Transparency is central for comprehensive risk management
Visibility of project status, risks and milestones is essential for ensuring fair risk allocation and to guarantee that all contractual obligations are met. Collaboration between public and private sector stakeholders in a central platform enables data-driven decision making and adaptive risk management throughout the project lifecycle.
Manage risk from tender to project delivery with Ansarada’s Procure, a single, central tool where stakeholders can collaborate throughout the project lifecycle. With data-driven insights and full traceability, Procure is designed to help PPP projects succeed.
