The paper "Risk and Opportunity in PPP-based Government Procurement" is an outstanding example of a management case study. Changes in government procurement strategies in many countries provided new opportunities as well as different kinds of risks. The emergence and adoption of PPP or Public-Private Partnership and PFI or Private Finance Initiatives for instance, not only changed the traditional procurement environment particularly in asset and capability acquisition but also introduced new kinds of risks, which are mostly associated with finance, and failures of private partners to deliver. This is because although PPP or PFI contract provides an opportunity for complete integration, they also create interdependence between privately built and operated public infrastructure and the risks associated with capital raised by the contracted private organisation. In view of the constraints cited by World Bank for PPP projects as cited in, this type of arrangement, aside from higher project cost and risks associated with a cost attached to private sector debt, include provisions allowing a private firm to reject responsibility for risks that are beyond their control (ex.
exchange rate risks). More importantly, since citizens will hold the government responsible for any quality and performance issue, the government has to manage risks associated with quality of facility and services even after project completion to ensure private partner compliance with agreed obligations. With an emphasis on PPP, the following section discusses the concept of PPP, the risk and opportunity associated with government procurement using PPP, safeguarding PPP procurement with risk management and others, case studies of actual PPP implementation where risks and opportunities in government procurement transpired, and concluding statements summarising the most important points. Risk and Opportunity in Procuring Goods and Services Risk is defined differently and depending on the discipline, its definition can be narrow or comprehensive.
For instance, most organisations often define risk as something that can significantly affect their objectives but this is not inclusive. This is because according to ISO Guide 73, ISO 31000, IRM or Institute of Risk Management as cited in, it is not only an “ effect of uncertainty on objectives” but factors associated with an event resulting to change in circumstances or deviation in the expected outcome. Moreover, its effect can be positive when it offers opportunity or loss of uncertainty and negative when it is a hazardous or pure risk that has the potential to undermine organisational objectives negatively. Opportunity, as mentioned above, materialised when a certain risk has positive effects or the expected outcome is beneficial to the risk-taker.
According to, opportunity risk is associated with an organisation’ s deliberate act to exploit a certain area in order to realise its perceived benefits. For instance, an organisation may opt to take a risk in launching a new product or initiate a cost-saving program, merge and acquire another company, and others. In government procurement, privatisation through contracting may result to a number of risks and opportunities.
For instance, although allowing a private enterprise to build a public infrastructure is risky in terms of cost and quality, private firms often complete a project faster than government thus private partnership in terms of time saved is more of an opportunity than a risk. However, since private capital is at risk, the government will need to wait until the private partner sees it economically feasible to start construction.
In contrast, since private enterprises are mostly after quick recovery of their investment, construction may be rushed and completed of low quality.
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