Browsing by Author "Nguyen, Duc Anh"

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    Improving Public-Private Partnership Contracts through Risk Characterization, Contract Mechanisms, and Flexibility
    Nguyen, Duc Anh (Virginia Tech, 2017-06-28)
    Public-private partnerships (PPPs) have become a significant global phenomenon and governments are utilizing them more frequently to deliver projects that satisfy increasing societal demands in infrastructure sectors such as highways. Compared to traditional project delivery approaches, PPPs are long-term contracts between the public and the private sectors, where the private sector is engaged in more project tasks and accepts more risks. However, due to their long-term and complex nature, PPP contracts face many issues. Consequently, each project's contract becomes vital to project success because it: allocates risks, governs project relationships, and can align parties' interests. This dissertation examined 21 project contracts in the US highway PPP market to investigate risk allocation; contract designs and risk sharing mechanisms; and revenue risk guarantees. Using a content analysis framework, the allocation of 31 risks associated with highway PPPs was determined. These risks were mostly transferred to the private sector or shared between public and private parties, and project context had a significant influence on risk allocation. Assessment of contract designs indicated that the public sector imposes extensive monitoring and retains a majority of the decision rights to preclude opportunistic actions by the private sector; further, risk sharing mechanisms were complex and largely dependent on resolution during project implementation, which likely increases ex post transaction costs. Finally, revenue guarantees, commonly structured as standard options to mitigate revenue risk, were redesigned to incorporate exotic option features; quantitative analysis revealed that exotic structures can better serve chief PPP stakeholders' interests through increased robustness and flexibility.
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    Risk Allocation, Decision Rights, and Adaptive Lifecycle Project Management Practices in Public-Private Partnership Highway Contracts in Australia, the Philippines, and India
    Nguyen, Anh Chi (Virginia Tech, 2023-06-22)
    Public-private partnerships (PPPs) are increasingly used to address pressing infrastructure demands. PPPs typically involve a long-term contract between governments and private firms for design, construction, operation, and maintenance of infrastructure where private finance is put at risk throughout the contract's duration. By bundling these key tasks in the hands of the private sector, PPPs are expected to address certain limitations of traditional delivery approaches by capitalizing on private sector expertise and capabilities. Yet, while studies have shown the feasibility of PPPs in many cases, key challenges such as asymmetric information, incentive misalignment, bounded rationality, high transaction costs, and contract incompleteness are greater in PPPs than in traditional projects. This is because PPPs involve numerous heterogeneous stakeholders and multiple discrete project phases spanning decades. These challenges interact and result in high uncertainty in PPPs. Thus, how to address uncertainties is crucial in designing and implementing a PPP contract. Using a deliberately sampled data set of 20 contemporary greenfield highway contracts in Australia, the Philippines, and India, three studies explore the current practices of three key areas in PPPs: risk allocation, decision rights allocation, and lifecycle project management. Together, these studies shed light on how contracting parties design contracts ex ante to address ex post uncertainty due to inevitable changes in circumstances and requirements. In the study of risk allocation, the results support the risk transfer tenet and risk allocation principle and criteria. For instance, most of the comprehensive set of the 35 key risks investigated were transferred to the private sector or shared; exogenous risks had more consistent allocation and were shared more than endogenous risks across the three countries. A high level of similarity in risk allocation within each country and across the countries was uncovered regardless of remarkably different characteristics at both project and country levels. The similarities among these countries may indicate common risk allocation practices across other comparable countries in the region, and it provides the basis for revisiting existing literature such as studies about the relationship between institutional strength and the extent of risk transfer. Several silent or indeterminate provisions were also identified, indicating areas for improving current contractual designs. Some shift of responsibilities to the private sector in tolled projects (typically longer contract duration) compared with government-paid ones (typically shorter) was observed across the countries. Some limited trends over time such as less silent or indeterminate provisions and more risks retained by the public sector in recent projects in the Philippines and India, respectively, were also observed. For the examination of decision rights allocation, the key finding was the dominant level of owner control in a comprehensive set of 10 key provisions in almost all contracts regardless of the country's level of development and the substantial number of risks transferred to the private sector. The observed owner control aligns with agency theory, and this finding is likely driven by governments' accountability concerns and risk aversion. The extensive level of owner control does not support the argument that interprets property rights theory as applied to PPPs as providing the private sector with more extensive decision rights given their significant role in the decades-long duration of a PPP project. Contracts in Australia were more rigid, having distinctive, rigorous, and more detailed requirements with more ex-ante effort required to specify numerous provisions. Some limited national trends include contractual design evolvement over time in some provisions in the Philippines and India. The identified silent provisions indicate areas for improvement. For the lifecycle project management inquiry, the practices explored specify project structure, requirements, processes, and procedures that function as key elements of measurement- and process-based management throughout a project's contract period. Implementing these elements can trigger corresponding governance mechanisms to promote contractual and relational governance. Contracts in Australia tend to be more comprehensive in many areas requiring more ex ante contracting efforts such as naming contractors in contracts and ex post implementation efforts to comply with many distinctive requirements such as those concerning environmental and community/user management. Meanwhile, contracts in Australia likely rely more on trust-based management versus monitoring/control-based management, having limited requirements for monitoring and safeguarding the contract. Together, these findings provide insights to more comprehensively understand how contracts are designed to address uncertainties. The common and different practices revealed benefit both practitioners and scholars and consequently suggest pathways toward enhancing the potential benefits and efficiency of PPPs; the former by facilitating informed decisions such as market entry, project selection, and strategic contractual designs at both the project-level and policy-level, especially for evolving markets such as the Philippines, India, and other regional and comparable countries; the latter by providing a framework with supporting contractual evidence that (i) reinforces and supports numerous contractual and governance theories and principles and (ii) establishes a baseline for multiple subsequent inquiries such as examining the key factors affecting parties' contractual choices, the effectiveness of the practices uncovered, and the gaps with parties' preferences. The research is characterized by its broad scope exploring comprehensive sets of key provisions in 20 contracts spanning three countries and its important implications for both theory and practice of PPP contractual design.