ABSTRACT
In parallel with an increase in collaborative working such as ‘partnering’ between the main contractor and the client organization and closer supply chain management since the Latham and Egan reports in the 1990s has been a growth in Prime Contracting based upon supply chain integration. This initiative has also been assisted by the development of the prime contracting approach which has been recommended by the United Kingdom Treasury and the National Audit Office for the procurement of central government construction projects through the Private Finance Initiative (PFI) and Public Private Partnership (PPP). Both these project finance routes bring together the infrastructure project management of design and construction with external private sector funding arrangements. On these projects such financing is typically through bank loans, equity provision/exchange or investment through a number of innovative funding arrangements when traditional client funding is unavailable or when other priorities have stronger demands on a government department’s limited finances. Under such PFI projects, the private sector involvement varies but in the main builds, finances and operates the public infrastructure such as roads, rail links and airports recovering the cost through service provision charges (sometimes referred to as ‘power by the hour’). Whilst there are a number of variations of these types of projects, each necessitates a long-term commitment between the facility provider, the user and the ultimate client who only acquires ownership of the facility at the expiry of a significant contracted period when the revenues have repaid the original project costs, the operational costs and associated profits. Whilst successful management of construction projects presents a challenge in any environment, the topic of this chapter is to present an understanding of the importance of
risk management in such PFI infrastructure projects and then to examine those specific risks appropriate to such projects in an international setting.
