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A Principal-Agent Theory Perspective on PPP Risk Allocation

School of Architecture and Built Environment, Deakin University, 1 Gheringhap Street, Geelong, VIC 3220, Australia
Faculty of Civil Engineering, Vilnius Gediminas Technical University, Saulėtekio al. 11, LT-10223 Vilnius, Lithuania
Faculty of Computing, Engineering and the Built Environment, Birmingham City University City Centre Campus, Millennium Point, Birmingham B47XG, UK
Author to whom correspondence should be addressed.
Sustainability 2019, 11(22), 6455;
Received: 10 October 2019 / Revised: 9 November 2019 / Accepted: 13 November 2019 / Published: 16 November 2019
(This article belongs to the Special Issue Sustainability and Risks in Construction Management)
This study proposes a framework for the allocation of risk in public private partnerships (PPP) projects. Its contribution lies in the recognition and incorporation of risks introduced by project stakeholders, and as articulated by the principal-agent theory (PAT). The framework assesses risks and routes these risks to those parties best equipped to mitigate their impact on the project. This allocation of risk is facilitated by a thirteen-step process. The practical benefit of this study lies in outlining a clear, systematic method for allocating risk efficiently to both the government and private enterprise parties of the project. In so doing, risk mitigation can be expected to improve project performance, optimize stakeholder goals, and enhance sustainability objectives, including improved operational life-cycle efficiency and elevated social and community benefits. View Full-Text
Keywords: risk allocation; public private partnerships; PPP; principal-agent theory risk allocation; public private partnerships; PPP; principal-agent theory
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Shrestha, A.; Tamošaitienė, J.; Martek, I.; Hosseini, M.R.; Edwards, D.J. A Principal-Agent Theory Perspective on PPP Risk Allocation. Sustainability 2019, 11, 6455.

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