Political risk in light rail transit PPP projects

Abstract

Since 2003 public-private partnerships (PPPs) have represented between 10 and 13.5% of the total investment in public services in the UK. The macro-economic and political benefits of PPPs were among the key drivers for central government's decision to promote this form of procurement to improve UK public services. Political support for a PPP project is critical and is frequently cited as the most important critical success factor. This paper investigates the significance of political support and reviews the treatment of political risk in a business case by the public sector project sponsor for major UK-based light rail transit PPP projects during their development stage. The investigation demonstrates that in the early project stages it is not traditional quantitative Monte Carlo risk analysis that is important; rather it is the identification and representation of political support within a business case together with an understanding of how this information is then used to inform critical project decisions.