integrated and prioritized on higher quality projects, which contributing to the motivation for faster development of PPP Currently, in Vietnam in general and Da Nang city in particular,
Trang 1PHAM THI TRANG
RISK MANAGEMENT IN THE PUBLIC PRIVATE PARTNERSHIP (PPP) OF TECHNICAL INFRASTRUCTURE CONSTRUCTION AND INVESTMENT PROJECTS IN DA NANG
Specialisation: Construction Mannagement
Code: 9.58 03 02 DISSERTATION ABSTRACT
Hanoi – 2019
Trang 2This dissertation in undertaken and completed at the National
University of Civil Engineering
Supervisor 1: Prof Dr Nguy ễn Huy Thanh
Supervisor 2: Assoc Prof Dr Phan Cao Tho
Reviewer 1: Prof Scientific Dr Nghiem Van Dinh
Reviewer 2 : Assoc Prof Dr Ngo Thi Thanh Van
Reviewer 3 : Dr Nguyen Pham Quang Tu
This dissertation will be defended before a Jury at the National University of Civil Engineering At 8 am on ……
This dissertation can be found at the National Library and also at the Library of the National University of Civil Engineering
Trang 3INTRODUCTION
1 Motivation of research
Today, the demand for investment in construction of technical infrastructure in Vietnam in general and Da Nang city in particular is increasing rapidly in both scale and field with the wide participation of the whole society Sustainability, synchronization and completeness of modern technical infrastructure are increasingly important, Which contributing to the production and business activities, investment activities of the economy
as well as the lives of the people However, the investment in technical infrastructure requires huge capital, beyond the ability of the State
Therefore, the form of public-private partnership for development investment in general, especially for investment in construction of technical infrastructure in particular, is considered a major capital mobilization channel in the future, contributing to reducing the burden as well as risks to the State budget It is one of the effective tools for the State to acquire necessary technical infrastructure for public interests and socio-economic development
In fact, in recent years, the mobilization of capital sources to invest
in technical infrastructure in Da Nang city has been implemented many works in the form of contracts mainly BT, in terms of long-term development, the investment in BT projects will not exist sustainably as land availability becomes increasingly limited Meanwhile, the legal framework as well as the mechanism have not encouraged private participation in investment in this area due to the complicated approval and licensing process, low capital recovery, and a responsible role There is still
a lack of clarity of both the State and the private sector; private investors face many risks It is the unstable impacts from the surrounding environment and the internal adjustment of the project that lead to changes
in many basic criteria that were initially planned and changed the effectiveness of the project That is the existence of risks to the investment project of technical infrastructure in the form of public-private partnership
in Da Nang city Therefore, if implemented effectively, a reasonable risk management solution will be able to minimize risks, especially in the early stages of screening for non-compliant projects integrated and prioritized on higher quality projects, which contributing to the motivation for faster development of PPP
Currently, in Vietnam in general and Da Nang city in particular, the issue of risk management in technical infrastructure construction and investment projects of PPP method that has not been studied, the extent of
Trang 4the author's understanding, there has not been any research study on risk management in technical infrastructure construction and investment projects
of PPP method
Due to this situation, the research and selection of the topic: "Risk management in the public private partnership (PPP) of technical infrastructures construction and investment projects in Da Nang" of
construction management major which is really necessary, in order to contribute to minimize the impact of risk on PPP projects in Da Nang city, thereby creating motivation to stimulate and attract potential investors, that contributing to the development of Da Nang city in particular and Vietnam
in general
2 Aims and objectives of research
- Aims of research: The dissertation proposes solutions to improve
the risk management in technical infrastructure construction and investment projects of PPP method, which contributing to attract this form of investment for the development of technical infrastructure in Da Nang city
- Objectives of research: For the purpose of research, The
dissertation proposes the tasks to be achieved by the research process are as follows:
(1) Analyzing and evaluating research works on public private partnerships, risk management in technical infrastructure construction and investment projects of PPP method in the country and abroad that to identify gaps that need further study of the dissertation
(2) Systematize, clarify and supplement the theoretical basis about risk management in technical infrastructure construction and investment projects of PPP method
(3) Survey to clarify the current status of PPP awareness, about risk management in technical infrastructure construction and investment projects
of PPP method in Danang City
(4) Proposing a scientific and feasible solution to complete the risk management in technical infrastructure construction and investment projects
of PPP method in Danang City
(5) Proposing the research and application of quantitative model and application of information technology to build software to support risk assessment and analysis that in order to effectively manage risks in technical infrastructure construction and investment projects of PPP method
3 Object and scope of research
- Object of research: Study risk management in technical
infrastructure construction and investment projects of PPP method of the Government
Trang 5- Scope of research : The scope of the dissertation is to study the
status of risk management in technical infrastructure construction and investment projects of PPP method (PPP) in Da Nang city from 2009 to
2018 Thereby, that proposing solutions suitable to the development orientation until 2030 and vision to 2045
4 Scientific basis of research
To solve the problem that needs research, the dissertation has used the following scientific bases:
Theoretical basis: Theoretical about risks and risk management of investment technical infrastructure projects in the form of public private partnership (PPP) Based on the theoretical basis, the author has supplemented and clarified the concepts, research points of view, influencing factors, etc…for risk management of infrastructure construction investment projects
Legal basis: This is an important basis to organize, deploy, evaluate project management in general and risk management in particular for technical infrastructure construction investment projects in the form of PPP Practical basis: Through the reality of the demand for investment in construction of technical infrastructure in the form of PPP, the practice of PPP awareness and implementation of risk management of technical infrastructure investment projects of PPP in Da Nang city, the practice of applying information technology in risk management, the author analyzed and assessed the situation, thereby proposing solutions to minimize appropriate risk of the State agency on the basis of ensuring the expected
benefits for the Investor
5 Methodology of research
In addition to the research methods such as synthesis, analysis, comparison, the dissertation has used mainly two qualitative and quantitative research methods to determine research results
6 Scientific and practical significance
a Scientific significance of research
On the basis of systematizing, clarifying and supplementing the rationale on risks and managing risks in technical infrastructure construction and investment projects of PPP method, the dissertation has analyzed the status of the research and implementation of PPP in domestic and abroad; conduct a survey to determine the awareness and demand for PPP investment in Da Nang city, find out the causes of failure in the implementation of construction investment projects in the PPP method in Danang, receive identifying common risks, assessing risk levels, that proposing reasonable risk allocation based on which groups of solutions and
Trang 6supporting software will be built for risk assessment and analysis that in order to effectively manage risk in the implementation of PPP projects Provide documents for research and training in related fields
To equip scientific bases to help Da Nang city to realize the construction of technical infrastructure construction investment under PPP method, to implement PPP projects effectively
b Practical significance of research
Contributing to improving institutions on the management of risks of
Contributing to building a database, completing analytical and evaluation tools for risk management to help the State management agencies make the right decisions thanks to the accuracy of information technology
Address of applying the dissertation's proposals and risk analysis software program: Construction Management Departments of Departments
of Danang City such as Department of Planning and Investment, Department of Finance, Department of Construction, etc and PPP project investors
7 New contributions of the dissertation
The dissertation inherits and acquires many research documents related to the topic, on that basis, supplements and develops in accordance with the requirements of the research subjects The dissertation results have made the following new contributions:
One is to systematize, clarify and supplement the theoretical and
practical basis for risk management in technical infrastructure construction and investment projects of the PPP method
Secondly, Analyze the current situation of risk management in
technical infrastructure construction and investment projects of the PPP in Vietnam in general and Da Nang city in particular through qualitative methods such as: list, analyze, evaluate data reported in Vietnam and some countries in the world and through quantitative survey methods
Thirdly, Proposing scientific and feasible solutions to complete the
risk management in technical infrastructure construction and investment projects of the PPP method in Da Nang city through risk identification, risk classification, risk analysis and risk control
Fourthly, Using SPSS.16 tool to identify factors affecting PPP
awareness in Da Nang city and risk classification, risk ranking, risk allocation
Fifthly, Research and application of quantitative analysis models,
thereby proposing the construction of information technology application software to analyze and assess risks, support quick decisions to manage
Trang 7risks of investment projects on construction of technical infrastructure in the form of public private partnership effectively
The structure of the dissertation consists of Introduction, 4 chapters (Chapter 1: 26 pages, Chapter 2: 25 pages, Chapter 3: 35 pages, chapter 4:
36 pages), conclusion - recommendations, 17 tables, 27 Figures, graph, indexes that presented on 150 pages of A4 paper excluding appendices
CHAPTER 1: OVERVIEW RESEARCH ABOUT TECHNICAL INFRASTRUCTURE CONSTRUCTION AND INVESTMENT PROJECTS OF THE PUBLIC PRIVATE PARTNERSHIP (PPP) 1.1 Overview of research works abroad
The PPP have been and continue to be the concern of many researchers in the world when the demand for technical infrastructure development that is a concern of many countries around the globe
There are many researchers who have studied infrastructure construction and investment projects of PPP method with different purposes and levels in both theoretical and practical terms The research focuses on two main directions, that is empirical research (research using empirical evidence through direct or indirect observation or experience) and non - empirical research (through research that use of models to analyze and evaluate problems), with 4 common trends: researching the success factors
of PPP projects, financial research of PPP projects, risk research of PPP project and transfer time study of PPP project
Risk management is also a research issue of global interest Researches around the world have developed models to manage risks for projects implemented under PPP, on the other hand, the PPP have been conducted in risk identification and analysis risk, allocate risk, thereby developing appropriate risk reduction strategies
All the researches in the world, besides analyzing and identifying important success factors of infrastructure projects in the form of PPP in general and investment project of technical infrastructure construction and investment in particular, a number of other studies focus on building building models to solve problems during PPP project implementation Most of the researches in the world mostly focus on the study of PPP method in infrastructure construction and investment projects in general, there are few studies related to infrastructure construction and investment projects in particular, so the research of the dissertation is really needed
1.2 Overview of research works in the country
Through the researches in the country, the author realized that PPP has been and continues to be a concern not only abroad but also a concern
Trang 8of Vietnam in general and Danang City In particular, the demand for technical infrastructure development is increasing
Most of the domestic research focuses on the following:
+ Studying and researching world experience in implementing PPP and drawing lessons for Vietnam ([3], [4], [19], [32], [39])
+ Research the situation analysis to make recommendations to promote PPP ([2], [15], [16], [17], [18], [31], [34])
+ Comprehensive research at the depth through analyzing the situation, exploring world experience and proposing solutions to implement PPP in Vietnam ([14], [20], [26] , [41])
The research on risks and risk management related to investment projects to build technical infrastructure in the PPP is very little research interest by the authors ([30], [35], [ 72])
Thus, most of the domestic researches are based on the research of current legal documents; others are researching on the basis of a common theoretical basis of the public private partnership form, studying experiences of some countries and applying them to Vietnam Few authors study risk identification and risk allocation, but only focus on transport projects implemented under PPP The risk management in technical infrastructure construction and investment projects of PPP method in Vietnam in general and Da Nang city in particular has not been studied
In Da Nang city, PPP has been interested and participated by many domestic and foreign investors, attracting both potential and most difficult investors in the region However, the sad thing is that many PPP projects have not yet been implemented and have not been effective as expected From this fact, Da Nang city needs to be responsible, need more efforts in applied research and effective management of risks of technical infrastructure construction and investment in PPP method that in order to soon realize this method of capital mobilization in daily life
1.3 Identify research gaps and issues that require in-depth study
With a broad perspective, it will be difficult for researchers to identify the most important factors for a successful PPP project regardless
of country, industry, phase or project model The main results identified in previous studies can only be summarized, tested and analyzed in order to expand the understanding of PPP regardless of country, stage of PPP project, not sectoral and project differentiation, thereby providing the methodology needed for further research by the author
Inheriting and developing the ideas and results of previous studies, this dissertation will study in depth risk management in technical infrastructure construction and investment projects of PPP method in
Trang 9Danang city to create a driving force PPP project development New issues need to be researched in depth:
(1) Analyzing and evaluating research works on public-private partnerships, risk management of technical infrastructure construction and investment projects in the country and abroad
(2) Systematize, clarify and supplement the theoretical and practical basis for public private partnership form and risk management in technical infrastructure construction and investment projects of PPP method
(3) The dissertation needs to quantify the impact level of risks and propose a plan to allocate risks of the investment project for construction of technical infrastructure in the form of PPP by qualitative and quantitative methods suitable to the reality in Da Nang city
(4) Analyze the current situation of risk management in technical infrastructure construction and investment projects of PPP method in Danang City
(5) Proposing a scientific and feasible solution to improve the risk management in technical infrastructure construction and investment projects
of PPP method in Danang City through risk identification risk, risk classification, risk analysis and risk control
(6) Use SPSS.16 tool to identify factors affecting PPP awareness in Danang city, risk classification, risk identification, risk ranking, risk allocation
(7) Research and apply quantitative analysis models, thereby proposing the development of information technology application software for risk assessment and analysis, supporting quick decision making to manage risks investment projects to build technical infrastructure in the form of effective public private partnerships
CHAPTER 2: THEORETICAL AND PRACTICAL BASIS ON RISK MANAGEMENT IN TECHNICAL INFRASTRUCTURE CONSTRUCTION AND INVESTMENT PROJECTS OF THE
PUBLIC PRIVATE PARTNERSHIP (PPP)
2.1 Theoretical basis on technical infrastructure
2.1.1 Technical infrastructure concept
Technical infrastructure means a system of technical infrastructure works including traffic works, communications, energy supply, public lighting, water supply, collection and treatment of wastewater and waste snakes, cemeteries, and other structures [28]
Within the scope of the dissertation, the technical infrastructure consists mainly of transport works, water supply, wastewater collection and treatment, solid waste, public lighting and other constructions such as Lien
Trang 10Chieu ports, fishing ports, pay little attention to communication, energy supply, cemeteries
2.1.2 Characteristics of technical infrastructure
Technical infrastructure has the following characteristics: Social; consistency, synchronization and synthesis; Complexity; Economical; Calculating time and space; Security and national defense; Modernity
2.1.3 Components of technical infrastructure
Technical infrastructure includes the following components: System
of transport and transport works; System of water supply and treatment works used for domestic water, industrial water and sewage network; Sanitation and waste management facilities systems include the disposal and disposal of hazardous waste; System of construction works and distribution of energy used in daily life and industry; System of communications works from telephone services to telecommunication information; systems of other constructions [28]
2.1.4 The role of technical infrastructure
Technical infrastructure is a complex work that directly or indirectly participates in the production and social activities of the society, closely linked to the object that the system serves, which is a condition for continued development urban development
2.2 Theoretical foundations of the public private partnership
2.2.1 Public private partnership (PPP) concept
Public private partnership is a cooperation agreement based on a long-term contract between the State and the Private Sector in infrastructure development and provision of public services for the purpose of taking advantage of that sharing risks and reasonable benefits among the parties
involved in the project
2.2.3 Types of project contracts implemented of the public private partnership (PPP)
Currently, in Vietnam and other countries in the world, the private partnership (PPP) has the following 10 types of contracts [11]: Build
public operate public transfer (BOT) contracts; Buildpublic transferpublic operate (BTO) contracts; Build - Transfer (BT) Contract; Build-own-operate (BOO) contract; Build - Transfer - Hire (BTL) Contracts; Contract of Construction
- Lease of Services - Transfer (BLT); Business - Management Contract (O&M); Mixed contracts; Contract of exploitation concession (Franchise);
Design - build - sponsor - operate (DBFO) contract
2.2.4 Characteristics of the public private partnership
+ PPP is a long-term cooperation commitment (about 10-50 years) + PPP creates a dynamic mechanism for proper assignment between parties in PPP project contracts
Trang 11+ PPP distinction should be made with privatization
2.2.5 Advantages and disadvantages of the public private partnership 2.2.5.1 Advantages of public private partnership
+ Improve the efficiency of using resources
+ Improve the quality of assets and services
+ Improving public sector management
+ Overall improvement of public sector procurement
2.2.5.2 Disadvantages of public private partnerships
+ PPP projects are likely to require high costs as private investors expect a higher return
+ PPP projects in many cases may cause the State sector to lose control of management
+ PPP create opportunities for developing group interests in the State sector, this is an objective risk that is difficult to control
2.3 Theoretical foundations of risk management in technical infrastructure construction and investment projects of public private partnership (PPP) method
2.3.1 The concept of risk management in technical infrastructure construction and investment projects of PPP method
a Risk concept
Risk is the occurrence of random factors (uncertainties), the occurrence of uncertainty events (risks) of technical infrastructure projects implemented in PPP method, changing the results project outcomes in the direction of negative or opportunistic and that (random) uncertainty can be measured or cannot be measured by probability theory
b Risk management concept
Risk management is the process of identifying and classifying risks, measuring to determine the level of risk, reasonably allocating risks, proposing solutions to deal with risks, and finally auditing risk control aims
to check, monitor and adjust the risks on a regular basis to minimize the systematic and effective risks throughout the life of a project, while also maximizing opportunities, helping the project achieve its expected goals
2.3.2 The process of managing risks in technical infrastructure construction and investment projects of PPP method
Risk management process is a logical sequence of 4 main steps: Identifying and classifying risks; Analyze and assess risks; Handling risks (coping with risks) through appropriate allocation of risks and proposing
solutions to minimize risks; Risk control
2.3.3 Content of steps of risk management process in technical infrastructure construction and investment projects of PPP method
a Risk identification and risk classification
Trang 12* Risk identification: Risk identification are the search, the
discovery, the detection and evaluation systematically and continuously assess the risks that may affect the investment project of technical infrastructure construction in the form of PPP and recognize its characteristics to effectively and systematically reduce risks throughout the life of a project, to maximize opportunities, help the project achieve its expected goals
* Risk classification:
Risk classification is the division and arrangement of risks in technical
infrastructure construction and investment projects of PPP method, according to a certain order at certain levels based on the similar and different signs between them and depending on the purpose that used in the analysis of economic activities in order to identify risks clearly, smoothly, without
duplication and without omission
* Classifying risks in technical infrastructure construction and investment projects of PPP method
In Vietnam, as in many countries around the world, although there is no agreement on classification, many researchers have pointed out a series of identifiable risks, thereby dividing risks according to many different ways In the dissertation, based on the typical characteristic of PPP project, is the cooperation agreement based on long-term contracts between the two partners, the State and the Private Sector, so the author studied and Proposing 2 ways of
classification as follows:
* Method 1: In order to effective risk management according to the
scope of occurrence, the author classified general risks and specific risks into 10 risk groups as shown in Figure 2.2
* Method 2: In order to effective risk management according to the
impact environment of risks, the author classified risks into risks caused by internal environment and risks caused by external environment with 8
specific groups as shown in Figure 2.3
b Risk analysis and evaluation:
Risk analysis is the calculation and assessment of the level of the impact of risks on the effectiveness of the technical infrastructure construction and investment project of PPP through the use of risk analysis methods and measurement techniques The risk analysis process means calculating the probability of occurrence and the level of impact of the risk
(weighted for risks) determined to serve the next action
c Risk handling
Risk Allocation:
Risk allocation is the determination of which risks are allocated to whom and when and when is reasonable, the risk should be allocated to the party
Trang 13capable of identifying the risk, the party can best control the consequences of the risk and the party can best handle that risk and handle the lowest cost in the shortest possible time
Risk response: Are reasonable activities to translate risks so as to be
conducive to project success and minimize the negative impact of threats on project objectives This process aims to identify effective response actions
appropriate to the project
d Risk control:
Risk control is the use of measures, techniques, tools, strategies, action plans, etc in order to prevent, avoid or minimize the damage, unexpected impacts may come to the project That is the key work, connecting all risk management techniques of the project together which in order to early identify risks, analyze and assess in time risks and propose solutions to minimize risks appropriately to ensure the objectives of the
project and improve project performance
2.3.4 Factors affecting the management of risks in technical infrastructure construction and investment projects of PPP method
Through the current status of implementing PPP, the author realized that many investment projects for construction of technical infrastructure in the form of PPP in Vietnam in general and Da Nang city in particular that have not been implemented effectively and objective causes of the problem This problem is due to the risk management is still limited because the investment project for construction of technical infrastructure in the form of PPP is also influenced by many factors Typically, there are five major factors affecting PPP project risk management: social factors, policy
implementation The factors are summarized through Figure 2.4 The impact of these 5 factors greatly affects the risk management of PPP projects
2.4 Actual risk management in technical infrastructure construction and investment projects of PPP method in countries around the world and in Vietnam
2.4.1 Actual in countries around the world
England: England is one of the countries applying the earliest PPP and has had many experiences to succeed in implementing PPP The issue
of risk management has been interested by many people in the UK, typically by Li et al (2005b) [99]
China: China has been planning and investing in road transport systems Therefore, the demand for capital is increasing rapidly Therefore, PPP is the optimal model to solve the capital problem for transport projects in China In order to effectively implement the PPP