Risk Allocation in Public-Private Partnership Contract - Case Study Example

The paper 'Risk Allocation in Public-Private Partnership Contract" is a great example of a management case study. A risk can be denoted as “the probability of a hazard turning into a disaster” (Lam et al, 486). A public-private partnership (PPP) is defined by the National Council, USA (2009) as “a contractual agreement between a public Agency federal state or local and a private sector entity.” This is viewed as a potential avenue for the disbursement of the value for money for the public infrastructural development that combines the benefits of modest proffering and elastic cooperation. This, therefore, helps create a common foundation on the allocation of risks amid the public and private sectors. In almost every project, risks are inevitable hence they should be catered for to avoid any probable losses that might accompany the occurrence of such risks. Therefore risk management involves identification, analysis, response, and control of the risk dynamics in such a way that the objectives of the parties involved are satisfactorily met. Risks in any given project can either carry with it positive consequences or come along with adverse effects that will affect the project towards the negative. Risks vary in magnitude and their associated outcomes. Due to the varying and ever-changing opportunities, the risks encountered daily in the construction project are dynamic and different. Therefore, risk management has come to be one of the most important tools as far as construction projects are concerned.

Each party in a project has its own objectives and expectations from the project which have to be met as the project proceeds. It is therefore the obligation of the project managers and other stakeholders to ensure a proper structure to be followed is put in place to cater to the risk concerns of the project hence bring forth sustainability and consistency in the progress of the project. The most effective and operative management highly relies on the distribution and management of respective risks together with opportunities accompanying it. It is already known that every construction project carries with it a long string of suppliers of materials and other technical personnel. Therefore, these risks have to be shared among all the parties involved so as to reduce the effects of the occurrence of the respective risks. Risks can be managed, diminished, reallocated, and consented to accept being overlooked. To effectively manage risks, it involves assessment and establishing the feasibility of the project, analysis and control of the risks, appropriate planning to lessen the risks, and avoiding dissatisfactory projects hence increasing the profitability of the project. As stated before, projects involve several parties of which each has to play his or her own part. More often disputes arise among various parties and this might have serious consequences on the completion of the project. Some of the areas of concern might include the delivery of substandard materials, low-quality jobs, incompetence of the personnel, and the high cost of materials.