Risks in Public–Private Partnerships: A Systematic Literature Review of Risk Factors, Their Impact and Risk Mitigation Strategies

Figures & data

Figure 1. Risk factors in PPPs.

Figure 2. Conceptual model.

Table 1. Summary of the Main Results.

Contract: Identification	Evaluation	Mitigation
(Re)negotiation
duration of negotiation insufficient process agreement asymmetric and imperfect information	time-consuming high costs delays personal conflicts	detailed (re)negotiation procedure
Incompleteness
impossibility of completing contract unforeseen risks contractual gaps	unclear distribution of tasks and responsibilities endangered financial commitment fostering renegotiations	contractual flexibility regular contractual changes
Contractual design
contract ambiguities missing flexibility lacking details missing transparency inadequate risk distribution	disorganized information and confusing information	formal guidance (e.g., expectations, responsibilities, communication)
Resources: Identification	Evaluation	Mitigation
Finance
poor initial cost estimates financial complexity transaction costs and costs of private financing availability of resources	revenues do not materialize management restrictions of partners	pay attention in the early stage of the PPP regular controls with certain PPP standards clear and consistent reporting support through government strategies to raise financial capital government agreement to pay revenue shortfall
Staff
unqualified staff availability of staff collective vs. individual working behavior resistance to change	poor-quality outcome	recruit highly qualified workforce consult internal experts or refer to external advisors regular training and continuous education
Time
different time horizons peaks and troughs in project duration	delays in completion increasing costs	communicate detailed time schedule, milestones and fixed deadlines penalties for late completion management need a constant focus from the beginning until the end of the project
Objectives: Identification	Evaluation	Mitigation
Different/Conflicting goals
profit maximizing vs. public service increase short-term revenues vs. long-term societal well-being decrease of costs vs. job creation	conflicts misinterpretations and asymmetric information flow project standstill/failure	awareness of different/conflicting goals understanding the partners’ goals open communication of goals
Strategy/Vision
different perspectives different interests heterogeneous background	different mindsets follow their own strategy	communicate common vision set goals at the very beginning strategic development model
Ambiguity
unclear policy unclear goal setting	commitment	contractual agreement clearly defined objectives
Structure: Identification	Evaluation	Mitigation
Roles/Responsibilities
different roles at the same time lack of clear definition of roles/responsibilities insufficient allocation lack of clear lines of authority process of distribution	negative effect on implementation possibility of failure increases	involvement of all hierarchical levels clear regulation of roles/responsibilities appropriate structural framework
Decision-making
complexity insufficient progress different expectations of partners lacking coordination of process	missing sense of responsibility	appropriate decision-making structures
Coordination issues
lack of transparent structures lack of coordination structural diff. between partners	negative impacts on project progress wastes resources	implementation framework implementation of a central authority
Commitment: Identification	Evaluation	Mitigation
Identification with project
different incentives negative attitude pessimistic behavior individual vs. common interests	no project occurrence partners can become disconnected no learning and no knowledge transfer no improvement in service quality	stable framework conditions rules and incentives established in contract rewards and penalties shared values and goals
Project engagement
lack of motivation unwillingness to collaborate unwillingness to invest reluctance to take risks lack of participation and involvement	no innovation partners follow stand- alone strategies uncertainty and instability	efficient and open communication understand indiv. views risk sharing, decision rights, flexible management rights whole organization involved management has to work together
Environment: Identification	Evaluation	Mitigation
Political risk
unstable government legal requirements political uncertainty lack of political support poor regulatory framework government restrictions	uncertainty project cancelation reestablishment of PPP conditions	government should develop legal framework for PPP government should maintain good economic conditions guarantee legal status during PPP positive attitude from government committee meetings, reports, external communication (stakeholders)
Demand/Revenue risk
revenue shortfalls low demand/use competitive environment	tension and legal conflicts monopoly situation project failure	experienced partner
Unpredictable incidents
geotechnical conditions extreme weather conditions natural catastrophes terrorism/war force majeure	no financial support any more due to financial crisis	good preparation
Communication: Identification	Evaluation	Mitigation
Interaction
lack of communication intensity of interaction complexity of communication processes lack of interpersonal communication	impedes knowledge sharing waste of resources time-consuming and cost-intensive renegotiation difficulties understanding each other	high frequency of information (e.g., weekly meetings) different channels clear structure open and transparent communication building trust
Information
quality of information flow information asymmetry handling of confidential information language/cultural/power differences availability of information	unstructured communication processes if not firmly embedded negative influence on trust and commitment	stable framework communication skills understand partners’ ambitions and interest
Trust: Identification	Evaluation	Mitigation
Monitoring
insufficient monitoring capacity too much monitoring unsuitable monitoring methods	negative effects on the whole project unnecessarily burden probability of project failure	legal safeguarding experts in financial and transaction processes
Trust-building
time-consuming long-term process trend to distrust	lack of willingness to share information ineffective cooperation	careful auditing of contracts formal and informal meetings reliable actions
Lack of transparency
insufficient exchange of information absence of comprehensive thinking	complex parameters	open and honest communication clear roles and responsibilities honesty between cooperation partners