Risk Allocation in PPP Unsolicited and Solicited Proposals in Latin America: Pilot Study in Colombia

Risk management between public and private sectors is crucial for the success of public-private partnership (PPP) projects. Thus, effectively allocating project risks is a key task in the development of public-private initiatives because it is a determinant characteristic for PPP success or failure. However, despite being an important topic for scholars and practitioners, today, the academic literature does not provide ample evidence of how risks are managed in solicited and unsolicited road PPP projects. Building on a systematic content analysis framework, this case study examines the allocation of risks in three unsolicited and three solicited highway PPP contracts over the last decade in Colombia. The framework was developed through line-by-line coding of contract provisions associated with risk-related issues. Results show that some risks were shared and addressed by the public sector, but the majority were transferred to the private sector. Conclusions indicate that there are two opportunistic behaviors identified, the private party who makes the unsolicited proposal seeks to transfer some endogenous risks to the public, and public agencies seek to transfer exogenous risks to the private in USPs; these changes are observed in unsolicited proposals rather than solicited proposals. Overall, this study intends to extend risk allocation studies by analyzing PPP contracts within this Latin American country.