Evaluation and ranking of risk factors in public–private partnership water supply projects in developing countries using fuzzy synthetic evaluation approach

• Published in: Expert systems with applications Vol. 42; no. 12; pp. 5102 - 5116
• Main Authors: Ameyaw, Effah Ernest, Chan, Albert P.C.
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 15.07.2015
• Subjects: Categories; Developing countries; Fuzzy; Fuzzy synthetic evaluation; Partnerships; Public–private partnership; Risk; Risk analysis; Risk assessment; Water supplies; Water supply; Fuzzy synthetic evaluation; Water supply; Public–private partnership; Risk assessment
• ISSN: 0957-4174; 1873-6793
• DOI: 10.1016/j.eswa.2015.02.041

•A fuzzy mathematical model is presented based on the fuzzy synthetic evaluation, FSE.•The model ranks principal risks in and predicts overall risk level of PPP projects.•FSE uses linguistic variables in assessing likelihoods and severities of risks.•Results show that water PPPs in developing countries are risky (with index of 4.78). As governments embark on public–private partnerships (PPPs) to develop their water infrastructure, effective risk assessment, which has remained nebulous, has become an important step to ensure success of these projects. This paper investigates the risk factors and assesses the risk level of PPP water supply projects in developing countries using fuzzy synthetic evaluation (FSE) approach. A 40-factor risk list was established through investigation in water projects cases and related literature and an industry-wide questionnaire survey with industry practitioners. Initial statistical analysis yielded 22 critical risk factors that would have significant impacts on water supply partnerships. These factors were categorized into three principal factors (financial/commercial, legal and socio-political, and technical) forming the input variables for FSE analysis. The study showed that the overall risk level of water PPPs in developing countries is high, suggesting that these projects are risky to both governments and private participants. The fuzzy analysis, overall, confirmed that financial/commercial risk category is the most critical principal factor, followed by legal and socio-political category and technical category. The FSE approach to risk assessment can be used as an initial screening to establish risk factors that require attention of management and further detailed analysis. This study demonstrates that FSE methodology can be used to synthetically analyze local conditions in a country prior to setting up the project structure and normal due diligence. It is a multi-attribute risk assessment framework and may serve as a risk evaluation tool for private investors, policy-makers and decision-makers.