1、WAIS AHMAD BAHEEN2017280350Contents1. IntroductionA public-private partnership is a cooperative arrangement between two or more public and private sectors, typically of a long-term nature (Graeme A. Hodge). PPPs often involve a contract between a public sector authority and a private party, in which
2、 the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project. Public-private partnership (PPPs) are an increasingly common model for delivering infrastructure projects globally (Hovy). One of the key motivations for governme
3、nts to procure and deliver Infrastructure project via PPP models is the assumption that PPPs deliver greater value for money (VFM) than conventional delivery methods. However, due to the long concession period and large amount of investment, the risks associated with PPP projects should not be under
4、estimated. Generally, risk management includes: risk identification, risk assessment and risk responses (PMBOK, 2004). Allocating risks in PPPs, however, is inherently challenging (Hovy). Risk transfer to the private sector comes at a price, and transferring risks that the public agency is better ab
5、le to manage is likely to erode VFM. China is facing a rapid growth of people whose age is 60 years or above, which is predicted to double over the next decade. By the 2014 the number of elderly people whose age was 60 or above had reached 210 million. And is projected to exceed 400 million over the
6、 next decade, which Figure 1 Percentage of Older Populationis an increase of 28.7 percent, from 15.5 percent as of year 2014. More than half of Chinese elderly age people are living on their own. And this percentage is even higher in the large and medium cities. According to a research result, about
7、 70 percent of older adults are living alone or with a spouse only Thus to face the current rapid growth of aging problem in China, government has focused on establishing social infrastructures and improving healthcare and well-being of people. A possible way of combating the aging problem is seemin
8、gly establishing a public-private partnership project for aging in place. Traditionally, Chinese older adults remained at home, cared by family members rather than by long-term care institutions. Due to the “empty nest” problem, an increasing number of older adults will be in need of external care s
9、ervices, but the availability of affordable, public nursing homes is limited despite the governments continued efforts to expand the capacity. (Luo).Public-private partnership venture is an innovative Aging in Place model for the elderly offering care coordination and health care services to older a
10、dults residing in specially designed senior apartments, other senior private or public congregate housing, or in their own homes in the community. Aging in place is a much healthier approach as compare with long-term care delivery trajectory that forces a frail older person to move from one setting
11、to another as needs change and results in mental and physical deterioration ( (Karen). A question arises as to how government can best drive desirable outcomes, while enduring that the private sector accepts an appropriate level of related risk and is given scope to innovate in designing the infrast
12、ructure. And as how government can ensure a successful delivery of such long term Aging in Place project (foster infrastructure, 2012). For Aging in Place to be successful older adults must live in an environment supportive of independence, and care must be coordinated throughout the healthcare syst
13、em (Karen).2. Background: Aging in Place in China If interpreted in terms of relaxation of rules, some of the pension programs currently on the market are actually products of concerted efforts between the government and enterprises and can be called PPP in a broad sense. As of June 30th 2016, there
14、 were 239 national pension PPP project, accounting for 2.57% of the 9,285 PPP projects nationwide. The number of PPP projects aimed at medical and health (433) in compare to mostly used PPP delivery projects such as engineering (3241), transportation (1132), area development (554) and other fields,
15、are relatively small. Figure 2 PPP Projects PortionAs of June 30th 2016, the total investment in pension projects nationwide reached 141.1 billion yuan, accounting for 1.33% of the total investment in the countrys PPP projects of 10.6 trillion yuan. As of June 30th 2016, Shandong and Guizhou provinc
16、es have the largest number of pension programs that use the PPP model, 46 and 40 respectively. Followed by Henan (21), Sichuan (19) and Xinjiang (19), respectively. Of the eight provinces and municipalities that are directly under the central government, there are no PPP pension programs established
17、 in these cities, including Shanghai. As of June 30th 2016, of the 239 pension PPP projects in the country, the number of projects invested in retirement stand at 137 (57%) which is larger in compare to projects, such as elderly apartment projects 50 (21%), healthcare projects 48 (20%) and other fie
18、lds projects 4 (2%), respectively. Figure 3 Number of Pesion PPP ProjectsAs one of the financial instruments used by the government to boost the development of old industries, the PPP model has drawn much attention due to the high degree of government support, the long-term stabilization of the mark
19、et demand the relatively transparent charging pricing mechanism. However, the role of PPP model in the field of Aging in Place has not yet been brought into full play. Government leverage needs to be increased to facilitate the effective participation of diverse social capital. 3. Identifying risk i
20、n PPP projectsRisk management begins with risk identification and classification (PMBOK, 2004). Hence, its important to identify the risk in PPP projects, and the risks allocated with Aging in Place project. In a PPP, the private sector partner has an incentive to complete construction on, or ahead
21、of, time and provide high-quality services, as payments do not typically commence until the asset has been built and an agreed level of service is being provided. On a value-weighted average basis, PPP projects are delivered 3% ahead of schedule compared to 24% behind schedule for non-PPP projects.
22、As shown below:Figure 4 Delivery AdvantageWith reference to the commonly accepted academic analysis methods and combining with the characteristics of the Aging in Place projects, the risk of PPP project in Aging in Place are divided into three levels: macro risk, mid-range risk, and micro risk. i. M
23、acro Risk Macro risk is the risk that comes from the environment influence where the project is located. Specifically refers to the country, industry and natural risks, such as political and legal conditions, economic conditions, social conditions, and climate conditions. Essentially, these risks st
24、em from the risk events that occur outside the projects system boundaries, impacting the project itself and the post-operational outputs across the projects system boundaries. PPP projects in Aging in Place should also take into account the relevant legal policies, social concepts, market demand and
25、 other risk factors. Macro-risk is divided into five major categories: politics, economy, law, society and natural environment. As shown below: Figure 5 Macro-risk Factors in PPP Aging in Place projectsii. Mid-range risk The mid-range risk arises from the project itself, and the risk events and thei
26、r consequences occur within the projects system boundaries, reflecting the implementation of the PPP project. The mid-range risk are divided into four different factors: finance, design, implementation, and logistic. As shown below:Figure 6 Mid-rage risks in PPP Aging in Place projectsiii. Micro-Ris
27、k The micro-risk is related to each participant of the project and is the risk caused by the development and change of various types of contractual relationships between various stakeholders in the process of process of project implementation, and it also belongs to endogenous risk. Micro-risks in t
28、his article is carried out from the aspect of cooperation among partners and third-party responsibilities. The most important risk arises from the conflict of interest between government, public sector and the social capital participants. The public sector interests are mainly embodied in the realiz
29、ation of social benefits. The actions of social capital participants are completely free and profit-driven. Conflicts of interest are inevitable, resulting in a risk period that affects the output of the project. The relationship is shown below:Figure 7 Micro-Risks in PPP Aging in Place Projects4. A
30、llocating Risk in PPP Aging in Place ProjectThe goal of project sharing is to maximize the satisfaction of public and private sector of the plan so that the result of risk allocation would reduce the probability of risk occurrence and risk management cost, and to make PPP project attractive to all p
31、arties. This requires that the risk appetite of different risk-bearing entities should be established and a corresponding risk-sharing mechanism should be established so that the project can achieve a win-win situation. Considering huge investment, long construction and operation periods, and many u
32、ncertainties in the concession could happen, in addition the complicated relationship among the risk-bearing entities, the risk should be allocated to the party best able to manage them. In other words, the party that is best able to understand a risk, control likelihood of the risk occurring and/or minimize the impact of the risk should also be responsible for managing it (Paluine Hovy, 2015). 1. a) Government The political environment risk and legal risk faced by pension PPP projects mainly come from the s
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