Risk Sharing Improves A Lot

The Need For Better Risk-sharing Formula

Infrastructure projects are at the epicentre of development, as they form the basis for many other projects. With the relevant infrastructure in place, other projects get to find a soft landing and this makes it more sustainable. Infrastructure is the foundation for all and this is why it is a priority when it comes to policies and long-term plans.

However, to make the most of infrastructure projects, there is a need for a risk-sharing formula, as this improves the possibility of gaining value for money. Following a survey among PPP participants in Australia, several parties agreed that infrastructure projects will take a better form when risk is shared across board and not largely to the side of one of the parties.

The Study as led by Queensland University of Technology operates to ensure that infrastructure projects can achieve more in the market and bring more value to the participants. The study finds that projects that had a more adequate and balanced risk-sharing formula brought more value for money.

As such, the study postulates that there is a need for a better risk formula during these projects. The study has been able to help investors unearth some of the key factors to consider before entering into projects. Industry leaders have cited the study at different times claiming that it adds to the literature relevant to the sector.

The reason why projects with adequate risk-sharing formula perform better is not far-fetched. When risk is shared across the delivery teams and client, there is an improved chance that each team party to the collaborative project will take the project highly seriously knowing full well that risks cut across board.

Another reason the survey has also become relevant is because the participants were carefully selected across relevant sectors. The survey had 320 individuals participating and this number cut across people with quality experience on infrastructure projects in Australia. Also, across the participants, the projects that have been worked on lies between $100,000,000 and $500,000,000 in value.

So, the opinions of these people are not only valid but also informed. Before arriving at its conclusions, the survey analysed the over 200 collaborative government projects and sought to see the things that went down during the projects, the clients’ experience, and what they feel could have been done better.

Way Forward

Firstly, there will be a need to adopt a different and more balanced risk-sharing formula for collaborative projects. Furthermore, to ensure that infrastructure is constantly serving the needs of the country, there will be key performance indices to ensure the targets are met. For a start, the coalition will develop a 15-year pipeline infrastructural project to serve the infrastructural needs of the country.

To ensure effectiveness, this will be re-evaluated every five years to incorporate new things that would have arisen during the past five years. This way, the infrastructural design can continue to support the country’s needs. For accountability, the cost benefit analysis will be published regularly. This way, members of the public can follow through with the progress being made by the government.

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