Re: Understanding the risks in China’s PPP projects: ranking of their probability and consequence
Authors: Yongjian Ke, ShouQing Wang, Albert P.C. Chan  and Esther Cheung
accepted by Engineering, Construction and Architectural Management (EI)

Purpose – Based on the Chinese government’s increased Public-Private Partnership (PPP) experience in the last decade, they have made a lot of efforts to improve the investment environment.  This paper hence aims to conduct a more up to date evaluation of the potential risks in China’s PPP projects.

Design/methodology/approach – As part of a comprehensive research looking at implementing PPP, a two-round Delphi survey was conducted with experienced practitioners to identify the key risks that could be encountered in China’s PPP projects.  The probability of occurrence and severity of the consequence for the selected risks were derived from the surveys and used to calculate their relative risk significance index score.

Findings – The results showed that the top ten risks identified according to their risk significance index score are: (1) Government’s intervention, (2) Poor political decision-making, (3) Financial risk, (4) Government’s reliability, (5) Market demand change, (6) Corruption, (7) Subjective evaluation, (8) Interest rate change, (9) Immature juristic system, and (10) Inflation.  Further analysis was conducted on these risks so that the possible consequence, the most impacted parties, and the preferred allocation are discussed.  Recommendations on commercial principles or contract terms between the Chinese government and private consortium are also provided.

Originality/value – These up to date findings concerning the probability and consequence of key risks would provide a valuable reference for private investors who are planning to invest in infrastructure projects in China.

Keywords: risk identification, risk management, public private partnership (PPP), China

Article Type: Research paper

Re: Risk allocation in Public-Private Partnership infrastructure projects: comparative study
Authors: Yongjian Ke , ShouQing Wang  and Albert P.C. Chan
Journal of Infrastructure Systems, 2010, 16(4): 343-351. (SCI: 681AB, EI:20104713409640)

Abstract

It is important for the public and private sectors to establish effective risk allocation strategies for PPP projects in order to achieve a more efficient process of contract negotiation and reduce the occurrence of dispute during the concession period.  This paper aims firstly to identify the preferred risk allocation in PPP projects of mainland China and the Hong Kong Special Administrative Region (referred to as China and Hong Kong from here onwards) and then to compare these preferences to those in the UK and Greece by a questionnaire survey based on the same risk register.  The results in China and Hong Kong show that the public sector preferred to retain most political, legal and social risks, and share most micro level risks and force majeure risk; while the majority of meso level risks were preferred to be allocated to the private sector.  The comparative analyses of risk allocation preference among these four countries/jurisdictions indicate that the public sector in the UK was most able to transfer the PPP risks to the private sector, followed by Greece, Hong Kong and China.  Respondents from Greece exhibited the greatest degree of support for the public sector to retain the macro level risks.  All respondents agreed that private investors should take a more active role in managing the meso level risks.  Respondents from China and Hong Kong considered that majority of the micro level risks should be shared equally between the public and private sectors, while respondents from Greece indicated that the private sector should take a more active role in managing the micro level risks.  The comparative study provides international investors a better understanding of risk preferences in different countries/jurisdictions so that they could adjust their strategies according to the specific situation and achieve better value for money in running their PPP projects.

Keywords: risk allocation, risk management, public private partnership (PPP), comparative study.

Re: Developing a risk assessment model for PPP projects in China — A fuzzy synthetic evaluation approach
Authors: Yelin Xu, John F.Y. Yeung, Albert P.C. Chan, Daniel W.M. Chan, ShouQing Wang and Yongjian Ke
Automation in Construction, 2010, 19(7): 929-943. (SCI/EI)

Abstract

Earlier research works on PPP showed that an objective, reliable, and practical risk assessment model for PPP projects is essential to the successful implementation of PPP projects. However, actual empirical research studies in this research area are rather limited. This paper reports the second stage of a funded research study, which aims to develop a fuzzy synthetic evaluation model for assessing the risk level of a particular critical risk group (CRG) and the overall risk level associated with PPP projects in China. At the first research stage, thirty-four risk factors were identified through a comprehensive literature review and 3 new risk factors were proposed during a two-round Delphi questionnaire survey. The most critical 17 risk factors were selected through the calculation of normalized values. The correlation of these 17 critical risk factors (CRFs) was further analyzed via factor analysis and 6 CRGs were formulated, namely: (1) Macroeconomic Risk; (2) Construction and Operation Risk; (3) Government Maturity Risk; (4) Market Environment Risk; (5) Economic Viability Risk; and (6) Government Intervention. On the basis of the research works conducted at the first research stage, the weightings for each of the 17 critical risk factors (CRFs) and 6 CRGs were determined through the two-round Delphi questionnaire survey. A set of knowledge-based fuzzy inference rules was then established to set up the membership function for the 17 CRFs and 6 CRGs. The empirical research findings showed that the overall risk level of PPP highway projects is between “moderate risk” and “high risk”. Hence it could be construed that investment in PPP highway projects in China may be considered as risky. In fact, the Delphi survey respondents perceived that “Government Intervention” is the most CRG; with “Government Maturity Risk” being the second; “Economic Viability Risk” the third; “Market Environment Risk” the fourth; “Construction and Operation Risk” the fifth; and “Macroeconomic Risk” the last. These findings revealed that government intervention and corruption may be the major hurdles to the success of PPP highway projects in China. These may be caused by inadequate law and supervision system and poor public decision-making process. Although the fuzzy synthetic evaluation model was primarily developed for PPP projects in general, the research method could be replicated in a specific type of PPP project, such as water treatment projects and hospital projects, to produce similar models for inter-type comparisons. By doing so, it provides an opportunity for practitioners to assess the risk level of different types of PPP projects based on objective evidence rather than subjective judgment. The most CRG for different types of PPP projects could be identified and both precautionary and remedial actions could be taken as soon as possible. Such an extension would provide a deeper understanding of managing different types of PPP projects.

Keywords: Public–private partnerships (PPP); Risk assessment; Risk management; Fuzzy synthetic evaluation; Infrastructure; China

Full-text link: http://dx.doi.org/10.1016/j.autcon.2010.06.006

Re: Critical Success Factors for PPPs in Infrastructure Developments: Chinese Perspective
Authors: Albert PC Chan, Patrick TI Lam, Daniel WM Chan, Esther Cheung and Yongjian Ke
Journal of Construction Engineering and Management, 2010, 136(5): 484-494. (SCI: 583QH, EI: 20101712890213)

Abstract
This paper aims to explore the Critical Success Factors (CSFs) necessary for adopting Public Private Partnerships (PPPs) in both China and the Hong Kong Special Administration Region (referred to as Hong Kong from here onwards).  Although Hong Kong is part of China,  differences abound in terms of business culture and practice due to the previous British ruling.  Hong Kong is a metropolitan influenced by both western and eastern cultures, making it a unique city in China now.  Both the mainland and Hong Kong have been keen to deliver more infrastructure service projects through PPP mode, with the former aiming to meet its rapidly growing infrastructure demand and the latter uplifting its efficiency further.  Whilst the demand for more PPP projects is foreseeable in near future, it is necessary to investigate the CSFs of PPPs in these two similar and yet sufficiently different administrative systems.  An empirical questionnaire survey was conducted with relevant experienced practitioners in Hong Kong and China between October and December of 2007.  The respondents from both administrative systems were asked to rate the importance of eighteen CSFs identified from the literature.  The top CSF rated by both respondents from the mainland and Hong Kong was “Favorable legal framework”, highlighting the importance of legal framework to the success of PPP ventures.  The Kendall’s concordance test ensured that the questionnaires were suitable for analysis in terms of the internal consistency of those survey respondents within a certain group.  The Spearman rank correlation analysis showed that the responses between the two administrative systems were in general similar.  Three CSFs were highlighted by the independent 2-sample t-test to be statistically different between the two administrative systems; these included “Multi-benefit objectives”, “Appropriate risk allocation and risk sharing”, and “Available financial market”.  The results indicate a lack of objectives in adopting PPP projects in Hong Kong as seen in the case of West Kowloon Cultural District project.  Previous researchers have also emphasized the importance of an equitable risk sharing mechanism for PPP projects to perform successfully.  And also the restrictions of the financial market in China, due to the immature corporate bond market, the inadequate syndicated loan for debt financing; and the uncertainty of legal enforcement for floating charge on project assets when used as guarantees.   

CE Database subject headings: Public Private Partnership (PPP); Critical Success Factor (CSF); Procurement; China; Hong Kong.

Full-text link: http://dx.doi.org/10.1061/(ASCE)CO.1943-7862.0000152

Re: Preferred Risk Allocation in China’s Public-Private Partnership (PPP) Projects
Authors: Yongjian Ke, ShouQing Wang, Albert PC Chan and Patrick TI LAM
International Journal of Project Management, 2010, 28(5): 482-492. (SSCI: 609FN, EI: 20102112952334)

Abstract

As part of a comprehensive research into PPP implementation, a two-round Delphi survey was conducted with experienced practitioners to identify the preference of risk allocation in China’s PPP projects. The results show that the public sector would take sole responsibility for the risk “Expropriation and nationalization”, and take the majority of responsibility for 12 other risks related to government or government officials and their actions. Fourteen risks which neither the public nor private sector may be able to deal with them alone are preferred to be shared equally. The private sector would take the majority of responsibility for 10 risks that are at the project level. Interestingly, no risk fell into the category that should be solely allocated to the private sector. Further analysis of the reasons behind these allocation preferences was then conducted. Recommendations on commercial principles and contract terms between the public authorities and private consortia are also made.

Keywords: Risk management, Risk allocation; Public–private partnership (PPP); China

Full text: http://dx.doi.org/10.1016/j.ijproman.2009.08.007

Re: Potential Obstacles to Successful Implementation of Public-Private Partnerships in Beijing and the Hong Kong Special Administrative Region
Authors: Albert PC Chan, Patrick TI Lam, Daniel WM Chan, Esther Cheung and Yongjian Ke
Journal of Management in Engineering, ASCE, 26(1): 30-40. (SCI: 536IH; EI: 20100212620763)

Abstract
Public Private Partnership (PPP) has been practiced for quite some time around the world and there are numerous infrastructure, construction and building projects which are employing the concepts. Unfortunately, not all of these PPP projects are equally successful and some of these projects have been exposed to formidable obstacles. The need to identify potential obstacles for PPP projects is therefore becoming an important issue for both research and practice. Despite the amount of interest vested in PPP, it is normally the advantages of PPP that are touched on rather than the potential obstacles. Both China and the Hong Kong Special Administrative Region (referred to as Hong Kong from here onwards) have been keen to introduce more PPP projects. This paper presents part of the findings of an empirical questionnaire survey in relation to the prevailing barriers to PPP success conducted in these two administrative systems. Respondents were asked to rate the level of severity of thirteen potential obstacles towards PPP projects identified from a literature review. The top three obstacles rated by the mainland Chinese respondents were found to be ‘Lengthy delays in negotiation’; ‘Lack of experience and appropriate skills’; and ‘Lengthy delays because of political debate’. Similarly the first and third obstacles ranked by the mainland Chinese respondents were also ranked within top three by the Hong Kong respondents, together with ‘Very few schemes have actually reached the contract stage (aborted before contract)’. It was also discerned that ‘Less employment positions’; ‘Reduce the project accountability’, and ‘High project costs’ were all ranked bottom by both of the mainland Chinese and Hong Kong respondents. Moreover, the results obtained in the United Kingdom by Li (2003) also showed consistency with those of China and Hong Kong. Although the importance of the obstacles was similar it was realized that the scores from Li’s (2003) survey were much lower. This observation showed that the British respondents were less threatened by the obstacles, probably due to the fact that they are much more experienced and confident in undertaking PPP projects compared to China and Hong Kong. Further analysis of the data reflected that the responses within each administrative system were consistent as revealed from the Kendall’s concordance analysis. Although the Spearman rank correlation test indicated that there was no significant disagreement on the rankings of obstacles between respondents of the two administrative systems, considerable difference was detected by the independent 2-sample t-test in the mean value of their responses between the two administrative systems for the two obstacles ‘Lack of experience and appropriate skills’ and ‘Lengthy delays in negotiation’. In China, respondents felt that ‘Lack of experience and appropriate skills’ were highly important ranking it second place, but in Hong Kong this obstacle was ranked eighth, showing their confidence in experience and skills. For ‘Lengthy delays in negotiation’, although the ranking between China and Hong Kong was similar the difference in score showed a large variation. This represents a difference in tendering procedures between the two administrative regions.

CE Database subject headings: China, Hong Kong, Infrastructure, Partnerships, Private Sector, Procurement

Full-text link: http://dx.doi.org/10.1061/(ASCE)0742-597X(2010)26:1(30)

Re: Drivers for Adopting Public Private Partnerships – Empirical Comparison between China and Hong Kong Special Administrative Region
Authors: Albert PC Chan, Patrick TI Lam, Daniel WM Chan, Esther Cheung and Yongjian Ke
Journal of Construction Engineering and Management, ASCE, 135(11): 1115-1124. (SCI: 508FO; EI: 20094312399867)

Abstract
The private sector has long been involved in delivering public sector projects, whether its role has been as a partner or just as a contractor for the government. Over recent years the interest in adopting public private partnerships (PPP) has increased internationally. Many research studies have presented positive reasons for the governments and the private sector to welcome this form of procurement, rather than continue adopting the traditional options. This paper aims to explore and compare the key drivers for adopting PPP in China and the Hong Kong Special Administrative Region (referred to as Hong Kong from here onwards). An empirical questionnaire survey was conducted in both of these administrative systems and survey respondents were invited to rate their perceptions on the importance of fifteen different drivers identified. Eighty-seven completed survey questionnaires were returned for analysis. The findings indicated that respondents from China rated economy-related drivers higher, whereas Hong Kong respondents tended to rate efficiency-related drivers higher. China’s demand for more public infrastructure and services has imposed great pressure on the government’s budget, and therefore economic drivers were rated higher. On the other hand, with adequate financial reserve in hand and budget surplus over recent years, Hong Kong has tended to prefer paying for projects upfront, and hence efficiency was regarded more significantly. Amongst the fifteen drivers, both of the respondents from China and Hong Kong selected, ‘Provide an integrated solution (for public infrastructure/services)’ and ‘Solve the problem of public sector budget restraint’ to be within the top three drivers. Despite the general agreement on the ranking pattern, the results of independent 2-sample t-test showed that China and Hong Kong shared very different views on the driver ‘Reduce the total project cost’. This driver was ranked rather high by the mainland Chinese respondents, but much lower by the Hong Kong respondents. This finding can be construed that economic drivers are in general rated higher in China as compared to that in Hong Kong.

CE Database subject headings: China, Hong Kong, Infrastructure, Partnerships, Private Sector, Procurement.

Full text: http://dx.doi.org/10.1061/(ASCE)CO.1943-7862.0000088

Re: Research Trend of Public-Private Partnership in Construction Journals
Authors: Yongjian Ke, ShouQing Wang, Albert Ping-Chuen Chan and Esther Cheung
Journal of Construction Engineering and Management, 2009, 135(10): 1076-1086. (SCI: 494WJ; EI: 20094012350295)

Abstract
Al-Sharif and Kaka conducted an impressive series of content analyses of Public-Private Partnership (PPP) publications between 1998 and 2003 from four internationally renowned construction journals (including the International Journal of Project Management; the Journal of Construction Engineering and Management; the Construction Management and Economics; and the Engineering Construction and Architectural Management). Their work inspired the authors of this paper to continue from where they left it. Based on a two-stage literature review, PPP articles from 1998 to 2008 were analyzed in terms of the annual number of PPP articles published, the authors’ contribution, and the research focus in their studies. From the analysis it was found that the number of PPP publications in these journals has been increasing. This finding might imply that PPPs are becoming more important to the construction industry at large. In addition, this study also found that the U.K. researchers have published the largest number of PPP articles, followed by those from the U.S.A., Singapore, Hong Kong, Australia, China and Germany. Although the BOT scheme was the most frequently investigated form of PPP in earlier research, the diverse concept of PPP has attracted a lot of research interest and has become the focus of most recent PPP publications. Research topics published in these journals on investment environment, governance issues and other supported areas tend to receive more attention from researchers. Moreover, complicated and vigorous analysis techniques such as game theory and fuzzy set theory have also been applied in this field of study.

Subject headings: Infrastructure, Partnerships, Reviews, Research needs

Full text: http://dx.doi.org/10.1061/(ASCE)0733-9364(2009)135:10(1076)

Re: SWOT Analysis of Domestic Private Enterprises in Developing Infrastructure Projects in China
Authors: Yongjian Ke, Xinbo Zhao, Yingying Wang and Shouqing Wang
Journal of Financial Management of Property and Construction, 2009, 14 (2): 152 – 170

Abstract

Purpose: The purpose of this paper is to help domestic private enterprises (DPEs) identify their strengths, weaknesses, opportunities and threats (SWOT) in developing infrastructure projects in China.

Design/methodology/approach: This paper drew on extensive literature reviews coupled with brainstorming and interviews methodologies to compile a list of SWOT factors for DPEs in developing infrastructures. To validate the significance of the identified SWOT list, a questionnaire survey was thus carried out.

Findings: This paper identified 16 strengths, 15 weaknesses, 16 opportunities and 21 threats for DPEs in developing infrastructure projects in China. The opinions of respondents from different sectors were sought and evaluated to obtain the relative significance of these factors. A set of major SWOT hypothesized was then derived using factor analysis.

Research limitations/implications: The paper was limited to identifying SWOT factors in common therefore the next step should be proposing an adjustment framework to support decision marking.

Practical implications: These findings should provide a valuable reference not only for DPEs but also for foreign investors who are planning to invest in infrastructure projects in China.

Originality/value: The investors in both rounds of infrastructure investments in China in the last two decades have limitations. Foreign investors acting as the major player in the first round usually charged higher and preferred operating projects in more developed regions, while state-owned enterprises as the principle player in the second round were inefficient in the operation and management, which largely restrained the advantages of public-private partnership model. Therefore, there is an urgent need to explore the potential of DPEs, another potential major player in developing infrastructure projects. To this end, this paper provides valuable information through a comprehensive SWOT analysis to the DPEs.

Keywords: SWOT analysis, Infrastructure, Private companies

Full-text Link: http://www.emeraldinsight.com/10.1108/13664380910977600

Re: Equitable Financial Evaluation Method for Public-Private Partnership Projects
Authors: Yongjian Ke, Xinping Liu and Shouqing Wang
Tsinghua Science and Technology, 13(5): 702-707 (EI: 20090511886944)

Abstract
The feasibility study of a public-private partnership (PPP) project is regarded as one of the critical factors for successful implementation, but unfortunately the common financial evaluation methods currently used only represent the benefits of the private sector. There is, therefore, an urgent need to develop an equitable financial evaluation method for PPP projects. This paper presents a comprehensive literature review that examines international practices. An equitable financial evaluation method was then developed taking into account the inherent characteristics of PPP projects using six separate indicators and Monte Carlo simulations. The result for a bridge project in Romania shows that the method combines the viewpoints of all the relevant stakeholders to achieve an equitable financial evaluation of PPP projects.

Key words: financial evaluation; risk analysis; public-private partnership (PPP)

Full-text Link: http://dx.doi.org/10.1016/S1007-0214(08)70111-1