A Fuzzy-Based Evaluation of Financial Risks in Build–Own–Operate–Transfer Water Supply Projects
Ameyaw, Ernest E. and Chan, Albert and Owusu-Manu, D. and Edwards, D.J. and Dartey, Frederick (2017) A Fuzzy-Based Evaluation of Financial Risks in Build–Own–Operate–Transfer Water Supply Projects. Journal of Infrastructure Systems, 23 (4). ISSN 1076-0342
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Abstract
The build–own–operate–transfer (BOOT) scheme is widely used for the provision of new bulk water supply. However, this
scheme is complex and carries significant financial risks because of the characteristics of the water sector and the involvement of
public-private stakeholders with new and extended responsibilities, large private capital, and long contract duration. Drawing on the Nungua
Seawater Desalination Plant (NSDP) in Ghana, this study seeks to identify and assess the critical financial risks associated with BOOT water
supply projects and evaluate the financial risk level of the NSDP project. The risks and their relative criticality on the NSDP project are
investigated by using a questionnaire survey method. The questionnaire was formulated with a set of 18 risks derived from extant literature
and project documentation. Perceived critical financial risks affecting the NSDP project were assessed by a team of experts who had direct
involvement in the project. A fuzzy synthetic evaluation suggests that the project is financially risky and that all the risks are critical to the
project. Bankruptcy of consortium members, unfavorable economy of the host country, uncertainty in tariff adjustment of water products, rate
of return restrictions, and availability problem of private capital are the five most highly-ranked risks. The fuzzy technique is used to represent
and model experiential knowledge of the survey participants and to address the fuzziness of their expert judgments. The study’s results
facilitate prioritization of risks and a comprehensive risk management program during the lifecycle of the case project and future projects.
The fuzzy technique is suitable for early phases of BOOT projects to prioritize the risks that require a detailed analysis and to predict the risk
level of a project.
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