Dynamic Assessment of the Transfer Risks in China’s Public–Private Partnership Water Projects: A System Dynamics Approach

Abstract

Public–private partnerships (PPPs) are the primary means of delivering water projects in developing countries. In China, most water PPP projects remain in the construction and operation stages, with few having passed to the transfer stage. The lack of experience in managing transfer risks is itself an impediment to the further development of China’s PPPs. Thus, this study attempts to address two research concerns: (1) identifying transfer risks and risk factors, and (2) dynamically evaluating those transfer risks. Literature review, expert interviews, and process modeling via Integrated Computer-Aided Manufacturing Definition Method 0 (IDEF0) were utilized to identify and assess transfer risks with risk factors. The time-varying nature of transfer risks was evaluated using a system dynamics method. Eleven transfer risks and their value accumulation curves were identified. Value growth of legal and residual value risks remains steady over time. The risk values of contract, political, overhaul, information, and employee risks pose severe initial threats, but reduce on project transfer. However, credit, data transfer, after-transfer operational, and succession operator risks tend to escalate over time. The proposed model allows for a dynamic evaluation of transfer risks, and in so doing, improves the efficiency of PPP project transfer risk management.