Revelation of the Channel Tunnel's failure to risk allocation in Public-Private Partnership projects

Yongjian Ke, Shouqing Wang, Ping Chuen Chan

Research output: Journal article publicationJournal articleAcademic researchpeer-review

14 Citations (Scopus)

Abstract

Negotiations among project participants in Public-Private Partnership (PPP), especially those between government and the private consortium, are time-consuming and costly. Disputes often arise during the operation period, due to the characteristics of the PPP financing mode that typically involves huge investment, long concession period, high risks and complicated contractual structure. The Channel Tunnel, which has long been regarded as one of the top construction achievements in the 20th century, is a classical example to demonstrate the complexity of risk allocation. This paper assesses the risk allocation of the Channel Tunnel and compares it with what is generally perceived as an equitable situation. The results show that the major reason for Project Company's bankruptcy is that the consortium had taken up too many risks beyond its control capability. Based on the principle that risks should be allocated to a party who is best able to manage in a cost effective manner, the government should take up political risks, social risks, etc., while the private investors should be responsible for financing, construction, and operation risks, which will be later transferred to appropriate parties, such as contractor, lender, supplier, etc..
Original languageEnglish
Pages (from-to)97-102
Number of pages6
JournalTumu Gongcheng Xuebao/China Civil Engineering Journal
Volume41
Issue number12
Publication statusPublished - 1 Dec 2008

Keywords

  • Channel Tunnel
  • Infrastructure
  • Public-Private Partnership
  • Risk allocation

ASJC Scopus subject areas

  • Civil and Structural Engineering
  • Architecture
  • Building and Construction
  • Arts and Humanities (miscellaneous)

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