A Principal-Agent Theory Perspective on PPP Risk Allocation

Asheem Shrestha, Jolanta Tamošaitienė, Igor Martek, M Reza Hosseini and David J Edwards
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Asheem Shrestha: School of Architecture and Built Environment, Deakin University, 1 Gheringhap Street, Geelong, VIC 3220, Australia
Jolanta Tamošaitienė: Faculty of Civil Engineering, Vilnius Gediminas Technical University, Saulėtekio al. 11, LT-10223 Vilnius, Lithuania
Igor Martek: School of Architecture and Built Environment, Deakin University, 1 Gheringhap Street, Geelong, VIC 3220, Australia
M Reza Hosseini: School of Architecture and Built Environment, Deakin University, 1 Gheringhap Street, Geelong, VIC 3220, Australia
David J Edwards: Faculty of Computing, Engineering and the Built Environment, Birmingham City University City Centre Campus, Millennium Point, Birmingham B47XG, UK

Sustainability, 2019, vol. 11, issue 22, 1-18

Abstract: This study proposes a framework for the allocation of risk in public private partnerships (PPP) projects. Its contribution lies in the recognition and incorporation of risks introduced by project stakeholders, and as articulated by the principal-agent theory (PAT). The framework assesses risks and routes these risks to those parties best equipped to mitigate their impact on the project. This allocation of risk is facilitated by a thirteen-step process. The practical benefit of this study lies in outlining a clear, systematic method for allocating risk efficiently to both the government and private enterprise parties of the project. In so doing, risk mitigation can be expected to improve project performance, optimize stakeholder goals, and enhance sustainability objectives, including improved operational life-cycle efficiency and elevated social and community benefits.

Keywords: risk allocation; public private partnerships; PPP; principal-agent theory (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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