Private finance initiative: the risk involved

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Private finance initiative (PFI) is the financing of the delivery of public infrastructure projects by the private sector. The concept is appropriate where governments are unable or have difficulty in finding the delivery of the infrastructure needs of their people. This concept of infrastructure delivery has some inherent risks. Though this system promises to be such a good innovation, it has not flourished in the Ghanaian environment as expected. The main aim of this study is to identify the sources of risk in the PFI concept of infrastructure project delivery in the Ghanaian construction industry. This research work sought through a literature search and a brainstorming exercise to identify the risks associated with PFI as a delivery system for public infrastructure projects. A questionnaire survey to identify the risk factors that hampers the smooth implementation of the system in the Ghanaian environment was undertaken. The research revealed that the environment is not enabling enough to enhance the implementation of this system in the delivery of public infrastructure services due to some inherent risks. The risk sources impacting on the implementation were identified as, Political Risk Factors, Commercial Risk Factors, Legal Risks, and Project Characteristic factors. The subject of risk identification in the delivery concept must be carried out for specific infrastructure projects, with the other direct and indirect participants of the construction industry like legal advisors, the investors, insurance personnel, and investment advisors among others. This is to highlight the peculiar risk sources inherent in the delivery of specific public infrastructure projects through the PFI concept. Key words: Finance, project finance, public infrastructure, privatisation, risk, Ghana.
A thesis submitted to the School of Graduate Studies, Kwame Nkrumah University of Science and Technology, in partial fulfilment of the requirements for the award of Master of Science degree in Construction Management, 2001