The Key Element of PPP: Risk

  • Veronica Vecchi


The amount of risk transferred to the private operator must be enough to create the incentives that enhance the efficiency of delivery. But transferring risk has a cost in terms of increased finance costs. These affect the scale of the unitary charge, and hence only those risks that can be identified, managed and mitigated by the private operator should be allocated to them. Risk is also, in some jurisdictions, a crucial variable in terms of contract qualification and accounting treatment, and it must therefore be assessed objectively in both financial and economic appraisals. In this chapter, the key dimensions of risk assessment in these contexts are analysed in detail.


Risk cost finance costs rate of return financial appraisal economic appraisal 


  1. Boardman, A., & Hellowell, M. (2016). A Comparative Analysis and Evaluation of Specialist PPP Units’ Methodologies for Conducting Value for Money Appraisals. Journal of Comparative Policy Analysis, 19(3), 191–206.CrossRefGoogle Scholar
  2. Carillo, P., Robinson, H., Foale, P., Anumba, C., & Bouchlaghem, D. (2008). Participation, Barriers, and Opportunities in PFI: The United Kingdom Experience. Journal of Management in Engineering, 24, 138–145.CrossRefGoogle Scholar
  3. Eurostat. (2016). Manual on Government Deficit and Debt. Luxembourg: Eurostat.Google Scholar
  4. Farquharson, E., de Mästle, C. T., & Yescombe, E. R. (2011). How to Engage with the Private Sector in Public-private Partnerships in Emerging Markets. Washington, DC: World Bank Publications.CrossRefGoogle Scholar
  5. Hellowell, M., & Pollock, A. M. (2009). Non-profit Distribution: The Scottish Approach to Private Finance in Public Services. Social Policy and Society, 8(03), 405–418.CrossRefGoogle Scholar
  6. Hellowell, M., & Vecchi, V. (2012). An Evaluation of the Projected Returns to Investors on 10 PFI Projects Commissioned by the National Health Service. Financial Accountability & Management, 28(1), 77–100.CrossRefGoogle Scholar
  7. Hellowell, M., & Vecchi, V. (2015). The Non-Incremental Road to Disaster? A Comparative Policy Analysis of Agency Problems in the Commissioning of Infrastructure Projects in the UK and Italy. Journal of Comparative Policy Analysis: Research and Practice, 17, 519–532.
  8. Hellowell, M., Vecchi, V., & Caselli, S. (2015). Return of the State? An Appraisal of Policies to Enhance Access to Credit for Infrastructure-based PPPs. Public Money & Management, 35(1), 71–78.CrossRefGoogle Scholar
  9. Lonsdale, C. (2005). Risk Transfer and the UK Private Finance Initiative: A Theoretical Analysis. Policy and Politics, 33(2), 231–249.CrossRefGoogle Scholar
  10. National Audit Office. (2013). Review of the VFM Assessment Process for PFI.Google Scholar
  11. Office of the Auditor General of Ontario. (2014). Annual Report.Google Scholar
  12. Pollitt, M. (2005). Learning from UK Private Finance Initiative Experience. In G. A. Hodge & C. Greve (Eds.), The Challenge of Public-private Partnerships: Learning from International Experience (p. 207). Cheltenham: Edward Elgar Publishing.Google Scholar
  13. Pollock, A. M., Dunnigan, M. G., Gaffney, D., Price, D., & Shaoul, J. (1999). The Private Finance Initiative: Planning the “New” NHS: Downsizing for the 21st Century. BMJ: British Medical Journal, 319(7203), 179.CrossRefGoogle Scholar
  14. Shaoul, J., Stafford, A., & Stapleton, P. (2008). The Cost of Using Private Finance to Build, Finance and Operate Hospitals. Public Money & Management, 28(3), 101–108.CrossRefGoogle Scholar
  15. Siemiatycki, M., & Farooqi, N. (2012). Value for Money and Risk in Public–private Partnerships: Evaluating the Evidence. Journal of the American Planning Association, 78(3), 286–299.CrossRefGoogle Scholar
  16. Vecchi, V., Hellowell, M., & Gatti, S. (2013). Does the Private Sector Receive an Excessive Return from Investments in Health Care Infrastructure Projects? Evidence from the UK. Health Policy, 110(2), 243–270.CrossRefGoogle Scholar
  17. Vecchi, V., Hellowell, M., della Croce, R., & Gatti, S. (2017). Government Policies to Enhance Access to Credit for Infrastructure-based PPPs: An Approach to Classification and Appraisal. Public Money & Management, 37(2), 133–140.CrossRefGoogle Scholar

Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Veronica Vecchi
    • 1
  1. 1.Bocconi UniversityMilanItaly

Personalised recommendations