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

Patient safety and beyond: what should we expect from microneedle arrays in the transdermal delivery arena?

Research based upon microneedle (MN) arrays has intensified recently. While the initial focus was on biomolecules, the field has expanded to include delivery of conventional small-molecule drugs whose water solubility currently precludes transdermal administration. Much success has been achieved, with peptides, proteins, vaccines, antibodies and even particulates delivered by MN in therapeutic/prophylactic doses. Recent innovations have focused on enhanced formulation design, scalable manufacture and extension of exploitation to minimally invasive patient monitoring, ocular delivery and enhanced administration of cosmeceuticals. Only two MN-based drug/vaccine delivery products are currently marketed, partially due to limitations with older MN designs based upon silicon and metal. Even the more promising polymeric MN have raised a number of regulatory and manufacturability queries that the field must address. MN arrays have tremendous potential to yield real benefits for patients and industry and, through diligence, innovation and collaboration, this will begin to be realised over the next 3-5 years.