Identification and evaluation of risk allocation criteria and barriers: a Malaysian public private partnership project case study

Abstract

Risk allocation is a key to managing risks associated with the public private partnership projects. Optimal risk allocation between the parties involved, namely public and private, is the essence of successful PPP project implementation. This study intends to identify and prioritize significant risk allocation criteria and barriers preventing the optimal allocation of risk to PPP projects in Malaysia. Due to interaction among criteria and barriers, this research has adopted analytic network process in order to decompose decision model into meaningful network and weight decision elements. Data has been collected through literature review, questionnaire and interview with PPP project experts. This study reveals that "Bear the risk at lowest price”, “Control the chance of risk" and "Risk attitude" are three major optimal risk allocation criteria. “Different sets of information about project risk”, "Lack of efficient risk allocation mechanisms" and “Lack of understanding the benefits of optimal allocation” are of three major optimal risk allocation barriers identified throughout the study. The outcome can be used to improve the implementation of PPP project in Malaysia by more rationally allocating risks between parties involved.