The Diffusion of Risks in Public Private Partnership Contracts

Purpose The UK government argues that the benefits of public private partnership (PPP) in delivering public infrastructure stem from: transferring risks to the private sector within a structure in which financiers put their own capital at risk; and, the performance based payment mechanism, reinforced by the due diligence requirements imposed by the lenders financing the projects (HM Treasury, 2010). Prior studies of risk in PPPs have investigated ‘what’ risks are allocated and to ‘whom’, that is to the public or the private sector. The purpose of this study is to examine ‘how’ and ‘why’ PPP risks are diffused by their financiers. Design/methodology/approach This study focuses on the financial structure of PPPs and on their financiers. Empirical evidence comes from interviews conducted with equity and debt financiers. Findings The findings show that the financial structure of the deals generates risk aversion in both debt and equity financiers and that the need to attract affordable finance leads to risk diffusion through a network of companies using various means that include contractual mitigation through insurance, performance support guarantees, interest rate swaps and inflation hedges. Because of the complexity this process generates, both procurers and suppliers need expensive expert advice. The risk aversion and diffusion and the consequent need for advice add cost to the projects impacting on the government’s economic argument for risk transfer. Limitations and implications The empirical work covers the private finance initiative (PFI) type of PPP arrangements and therefore the risk diffusion mechanisms may not be generalisable to other forms of PPP, especially those that do not involve the use of high leverage or private finance. Moreover, the scope of this research is limited to exploring the diffusion of risk in the private sector. Further research is needed on how risk is diffused in other settings and on the value for money implication of risk diffusion in PPP contracts. Originality/value The expectation inherent in PPP is that the private sector will better manage those risks allocated to it and because private capital is at risk, financiers will perform due diligence with the ultimate outcome that only viable projects will proceed. This paper presents empirical evidence that raises questions about these expectations. Key words: public private partnership, risk management, diffusion, private finance initiative, financiers

Life Cycle Assessment guidelines for the sustainable production and recycling of aggregates:The Sustainable Aggregates Resource Management project (SARMa)

The mining/quarrying industry is a sector of industry where there are very few Life Cycle Assessment (LCA) tools, and where the role of LCA has been poorly investigated. A key issue is the integration of three inter-dependent life cycles: Project, Asset and Product. Given the unique features of mining LCAs, this Note from the Field presents a common methodology implemented within the Sustainable Aggregates Resource Management (SARMa) Project (www.sarmaproject.eu) in order to boost adoption of LCA in the aggregate industry in South Eastern Europe. The proposed methodology emphasises the importance of resource efficiency and recycling in the context of a Sustainable Supply Mix of aggregates for the construction industry. Through its adoption, aggregate producers, recyclers, and governmental planners would gain confidence with LCA tools and conduct consistent and meaningful life cycle analyses of natural and recycled aggregates. © 2011 Elsevier Ltd. All rights reserved.

The application of metabolomic biomarker screening tools for improved Bovine Respiratory Disease diagnosis and management

Bovine Respiratory Disease (BRD) is considered to be one of the most significant causes of economic loss in cattle worldwide. The disease has multifactorial aetiology, where viral induced respiratory damage can predispose animals to developing secondary bacterial infections. Accurate identification of viral infected animals prior to the onset of bacterial infection is necessary to reduce the overuse of antimicrobial treatments and minimize further economic losses from reduced production capacity and death. This research focuses on Bovine Parainfluenza Virus Type 3 (BPIV-3), one of the viruses involved in generating BRD. Vaccination measures for BPIV-3 can induce a level of immunity preventing disease progression, however, not all animals respond equally and immunization can complicate disease diagnosis. Alternative diagnostic approaches are required to identify animals which fail to respond to vaccination during infection outbreaks and are therefore likely to be more susceptible to secondary bacterial infections. Mass spectrometry based metabolomics was employed to identify plasma markers capable of differentiating between vaccinated and non-vaccinated calves after challenge with BPIV-3. Differentiation of vaccinated and non-vaccinated study groups (n=6) was possible as early as day 2 post-BPIV-3 challenge up until day 20 using a panel of potential metabolite markers. This study illustrates the potential for metabolomics to provide more detailed information on animal vaccination status that could be used to develop tools for improved herd health management, reduce economic loss through rapid identification and isolation of animals without immune protection (improving herd level immunity) and help reduce the usage of antimicrobial therapeutic treatments in animals.

Does the UK Local Finance Improvement Trust (Lift) Initiative Improve Risk Management in Public-Private Procurement?

The UK government introduced the Private Finance Initiative (PFI) and, latterly, the Local Improvement Finance Trust (LIFT) in an attempt to improve public service provision. As a variant of PFI, LIFT seeks to create a framework for the effective provision of primary care facilities. Like conventional PFI procurement, LIFT projects involve long-term contracts, complex multi-party interactions and thus create various risks to public sector clients. This paper investigates the advantages and disadvantages of LIFT with a focus on how this approach facilitates or impedes risk management from the public sector client perspective. Our paper concludes that LIFT has a potential for creating additional problems, including the further reduction of public sector control, conflicts of interest, the inappropriate use of enabling funds, and higher than market rental costs affecting the uptake of space in the buildings by local health care providers. However, there is also evidence that LIFT has facilitated new investment and that Primary Care Trusts (PCTs) have themselves started addressing some of the weaknesses of this procurement format through the bundling of projects and other forms of regional co-operation.