Indicators for Sustainable Demand Risk Allocation in Transport Infrastructure Projects

Abstract

Efficient risk allocation has been proven to be at the heart of effective and efficient infrastructure project operation. While most risks may be reasonably assigned in transport infrastructure projects, demand risk remains ambiguous due to the multiple factors influencing its appropriate allocation. The present research is a first attempt to introduce indicators as tools to guide contracting parties in assigning demand risk. The level of control, based on infrastructure characteristics and attributes, describes the potential control over demand an operator may have. The optimal demand risk allocation is seen as an assessment of the appropriateness of demand risk allocation effected. The indicators are constructed following accomplished rules set by supranational organizations. Furthermore, 51 project cases ranging different transport infrastructure modes from 19 European countries including projects delivered traditionally and as Public Private Partnerships were used to validate the indicators and assess their performance. Results show the potential of both indicators to guide governments, operators and also financiers in appropriately allocating demand risk in transport infrastructure projects. This optimality was shown to be related to more accurate traffic forecasts resulting in sustainable transport infrastructure as the project then delivers on its economic, environmental, and social/welfare targets. Keywords: transport infrastructure; sustainable demand risk allocation; Public Private Partnerships; composite indicators