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A Fuzzy-Based Evaluation of Financial Risks in Build–Own–Operate–Transfer Water Supply Projects

Ernest Effah Ameyaw · Albert P.C. Chan · De‐Graft Owusu‐Manu · David John Edwards · Frederick Dartey

27 citations0/0 files storedJournal of Infrastructure Systems

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Public-Private Partnership Projects Construction Project Management and Performance Capital Investment and Risk Analysis

Abstract

The build–own–operate–transfer (BOOT) scheme is widely used for the provision of new bulk water supply. However, this scheme is complex and carries significant financial risks because of the characteristics of the water sector and the involvement of public-private stakeholders with new and extended responsibilities, large private capital, and long contract duration. Drawing on the Nungua Seawater Desalination Plant (NSDP) in Ghana, this study seeks to identify and assess the critical financial risks associated with BOOT water supply projects and evaluate the financial risk level of the NSDP project. The risks and their relative criticality on the NSDP project are investigated by using a questionnaire survey method. The questionnaire was formulated with a set of 18 risks derived from extant literature and project documentation. Perceived critical financial risks affecting the NSDP project were assessed by a team of experts who had direct involvement in the project. A fuzzy synthetic evaluation suggests that the project is financially risky and that all the risks are critical to the project. Bankruptcy of consortium members, unfavorable economy of the host country, uncertainty in tariff adjustment of water products, rate of return restrictions, and availability problem of private capital are the five most highly-ranked risks. The fuzzy technique is used to represent and model experiential knowledge of the survey participants and to address the fuzziness of their expert judgments. The study’s results facilitate prioritization of risks and a comprehensive risk management program during the lifecycle of the case project and future projects. The fuzzy technique is suitable for early phases of BOOT projects to prioritize the risks that require a detailed analysis and to predict the risk level of a project.

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References

1965Fuzzy sets 1996Fuzzy sets 2007Global Sensitivity Analysis. The Primer 2004A guide to the project management body of knowledge (PMBOK guide)1992Fuzzy Multiple Attribute Decision Making 2014A review of application of multi-criteria decision making methods in construction 2006Risk allocation in the private provision of public infrastructure 2000A proposal for construction project risk assessment using fuzzy logic

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