Subsidy risk related to construction projects: Seeking causes

Abstract

Many construction projects are realized with public subsidy, e.g. subsidies from the European Union, state budget and/or municipal resources. The reimbursement of the subsidy depends on a number of conditions, such as completion of the project in time or compliance with operation conditions. The purpose of this research is to seek causes of subsidy risk related to construction projects. In particular, research aims at addressing causes that may lead to the loss of subsidy, reduction of subsidy and/or a penalty payment. Research is conducted as a case study of selected construction projects and the Czech Republic is chosen as a study area. Set of data representing 20 construction projects which faced the threat of reduction or loss of subsidy was collected from available sources and results represent the spectrum of identified risk causes and their distribution in the different phases of the project life cycle and according to the risk source breakdown structure. From managerial perspective, output of this research may serve as a support for investors who plan to apply for public subsidy for their construction projects. Several recommendations for subsidy risk avoidance have been proposed at the end of the paper.