Risk Allocation In Public Private Partnership

The topic of this study is regarding a type of contract between the Public (Malaysia) and Private sector (Contractor), and also the risk allocate by the private sector as the PPP which the risk. The study is aimed to identify.

Overview of the Chapter

Chapter 1 is regarding the background of this research and will be explaining on how. Through that explanations, why the reason this research is conducted, its significance and how it shall benefit the field of Architecture, Planning and Surveying will be briefed in this chapter. This chapter will also explain on the creation of framework, research questions, research objectives, hypothesis, and the scope of the research on who will be the targeted respondents to obtain the findings required to complete this research. Furthermore, the conceptual and operational definition of this research will be explained in this chapter as well.

Background of the Study

Problem Statement

Public Private Partnership (PPP) is a public procurement model in which the value for money is optimised through efficient allocation of risks, whole life service approach, private sector innovation and management skills as well as synergies from inter-linking the design, finance, construction and operations (Department, 2009). PPP includes the handover to the private sector the responsibility to finance and manage a package of capital investment and services including the construction, management, maintenance, refurbishment and replacement of public sector assets such as buildings, infrastructure, equipment and other facilities, which creates a standalone business (Zaimuddin, 2014).

In these PPP projects, there is a contract for the private party to deliver public infrastructure-based services over a long period of time. The private party will raise its own funds to finance the whole or part of the assets that will deliver the services based on agreed performances. However, there’s a several project that have been faced several problems such as delay, greater than traditional cost, longer construction project and etc. It is observed that Latin America and East Asia Pacific met the highest failure rate in terms of number of projects canceled, at 135 and 86 projects respectively and the percentage of Malaysia PPP project failures is the second highest in East Asia with 22 failed projects in 2013 (Alireza & Valipour, 2015).

Case

Based on the problem that been mentioned above, PPP projects affected both party, public and private. The public government faced higher project cost, reduce the project accountability, long term contract (20-25 years), and etc. Despite of this problem, according to (Kaur, 2018) from The Star Online, The Kuala Lumpur-Singapore high-speed rail (HSR) and the Klang-Valley mass rapid transit line 3 (MRT 3) projects are likely to be postponed, as the new government looks to review mega projects in the construction sector.

For private sector, they faced problems such as unstable and lack of support from government, strong political interference and etc. According to (Jaafar, 2018) from The Edge Markets, when the government has decided to terminate MMC Gamuda JV's MRT2 underground contract because of expected the contract value to be reduced, the Gamuda Bhd and MMC Corp Bhd stock shares fell among Bursa Malaysia top decliners. Apart from that, MMC-Gamuda said almost 20,000 employees from a supply chain of more than 600 Malaysian companies would lose their jobs following the cancellation of the project and more than 3,000 employees of the MMC-Gamuda joint venture, which over 60% are bumiputra.

• What is the problem?
• Who has the problem?
• Where does the problem occur?
• When does the problem occur?
• What does the problem impact?

Research Question

What are the significant risks in Malaysia PPP projects?

RQ2: What is the risk allocation for PPP project?

RQ3: What is the critical success factor of PPP project?

Research Objective

• To examine the major risks in Malaysian PPP projects.
• To identify risk allocation between public and private sector in Public Private Partnership projects.
• To evaluate the critical success factor in Malaysia PPP project.

Purpose of Research

Based on the review of the related issues and problems, the aim of this study is to identify the risk allocation of Public Private Partnership (PPP) projects by 1. 7 CONCEPTUAL FRAMEWORKCHAPTER TWOLITERATURE REVIEW

Public Private Partnership

Public Private Partnership or known as PPPs is a form of public sector procurement which the public, Government engage the private sector to manage and transfers a certain level of responsibilities to the private sector in providing public facilities or services. PPP also responsible to finance and manage a package of capital investment and services including the construction, management, maintenance, refurbishment and replacement of public sector assets such as buildings, infrastructure, equipment and other facilities, which creates a standalone business (Public-Private Partnership Unit, 2009). In different words, PPP is an agreement which will require the risks sharing, rewards, resources and responsibilities for actions and outcomes on a long-term basis. The terms PPP and PFI have often been used inter-changeably throughout the world although there are differences between them. However, for Malaysia, the PFI principles as announced in the Ninth Malaysia Plan form a subset of the umbrella PPP principles (Public-Private Partnership Unit, 2009). Public Private Partnership or known as PPPs or (3PU) is a type of procurement that has been effectively implemented by many countries in worldwide likes USA, UK, CHINA, JAPAN AND ITALY.

On 1981, the Government of Malaysia has introduced Malaysian Incorporated Policy to encourage cooperation between the public and private sectors in delivering public construction projects under the Fourth Malaysia Plan (UKAS, 2016). *by who*, *why it implement*Two years later, the Privatisation Policy had been launched in 1983 and followed by Privatisation Master Plan (1991) for Public Private Partnership (PPP) projects *by who. The terms PPP and PFI have often been used inter-changeably throughout the world although there are differences between them. However, for Malaysia, the PFI principles as announced in the Ninth Malaysia Plan form a subset of the umbrella PPP principles (Public-Private Partnership Unit, 2009).