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Risk Pricing Strategies for Public-Private Partnership Projects

Boussabaine, Abdelhalim

Risk Pricing Strategies for Public-Private Partnership Projects

November 2013
  • 278 pages
  • Hardcover
  • English
ISBN: 978-1-4051-7792-4
available, free shipping

Prices incl. VAT

Table of contents

Preface ix

Chapter 1 Mapping of the PPP's Processes and Concepts 1

1.1 Introduction 1

1.2 Rationale for PPPs 2

1.3 key stages in the PPP procurement process 7

1.4 Financing PPP projects 12

1.5 Rationale for value for money and risk transfer in PPPs 16

1.6 PPP project structure 19

1.7 Payment mechanisms in PPPs 25

1.8 PPP emerging issues 28

1.9 Summary 29

References 30

Chapter 2 Uncertainty in Pricing Risk 31

2.1 Introduction 31

2.2 Concepts of Risk and uncertainty 31

2.3 Relationship between risk and uncertainty 44

2.4 Attitudes to risk and uncertainty 46

2.5 Variability and uncertainty 48

2.6 Quantifying uncertainties in risk pricing 50

2.7 Taxonomies of uncertainty 53

2.8 Pricing risk under uncertainty 54

2.9 Summary 55

References 55

Chapter 3 Bias in Risk Pricing 59

3.1 Introduction 59

3.2 Risk bias theories 60

3.3 Sources of bias 66

3.4 Managing bias 81

3.5 Summary 87

References 87

Chapter 4 Management Strategies for Risk Pricing 91

4.1 Introduction 91

4.2 Principles of risk pricing strategies 92

4.3 Risk pricing management strategies 95

4.4 Value gain and loss from risk retention 97

4.5 Risk retention analysis 100

4.6 Resources capability for risk control 103

4.7 Summary 105

References 106

Chapter 5 Framework for Pricing PPP Risks 107

5.1 Introduction 107

5.2 Framework for pricing construction risks 108

5.3 Strategies for risk costing 114

5.4 Risk pricing in PPP transaction 119

5.5 The choice of the discount rate in risk costing 129

5.6 Summary 135

References 136

Chapter 6 Risk Measurement and Modelling 139

6.1 Introduction 139

6.2 Quantifying risks 140

6.3 Probability distributions for risk costing quantification 146

6.4 Risk analysis Methods 153

6.5 Selecting a risk analysis technique 162

6.6 How to build a risk pricing BN model 164

6.7 Building risk price models using Monte Carlo simulation 169

6.8 Summary 172

References 172

Chapter 7 Risk Allocation Networks in PPP Contracts 175

7.1 Introduction 175

7.2 Risk systems in PPP contracts 178

7.3 Modelling the parameters of the risk allocation network 180

7.4 The structure of risk allocation networks in PPP contracts 181

7.5 Modelling the structure of the risk allocation network 185

7.6 The characteristics of a typical PPP risk allocation network 186

7.7 Key observations 191

7.8 Summary 192

References 193

Chapter 8 Pricing Development and Construction Risks 195

8.1 Introduction 195

8.2 Overview of development and construction risks 196

8.3 Strategies for mitigating and managing development and construction risks 209

8.4 Pricing development and construction risks 214

8.5 Summary 218

References 219

Chapter 9 Pricing Operational Risks 221

9.1 Introduction 221

9.2 Overview of operational risks 221

9.3 Strategies for mitigating and managing operational risks 228

9.4 Pricing operational risks 233

9.5 Operational risks pricing example 235

9.6 Summary 241

References 241

Chapter 10 Financial Risk Assessment in PPP Projects 243

10.1 Introduction 243

10.2 Emergence of risks in project finance 244

10.3 Risk network concepts 246

10.4 Project finance cash Flow risk network 247

10.5 Assessment results 256

10.6 Summary 260

10.7 Acknowledgements 261

References 261

Index 263