A Risk Assessment Model for Wastewater Treatment and Seawater Desalination PPPs in Egypt

Abstract

Developing countries resort to the Public-Private Partnership (PPP) scheme primarily due to shortage of public funds for infrastructure projects and to minimize the risk borne by the government. Since Egypt is currently facing water scarcity, the necessity for investments in non-conventional water supply projects through the PPP scheme has increased tremendously. This study aims to identify risks encountered by Domestic Wastewater Treatment (DWWT) and Seawater Desalination (SWD) PPPs in Egypt and develop a preferred risk allocation scheme as well as a fuzzy risk assessment model for such projects. Forty nine and forty eight risk factors were identified for DWWT and SWD PPPs, respectively through literature review and content analysis followed by experts’ interviews. Statistical analysis yielded 12 and 11 risk factors as the top significant for DWWT and SWD PPPs, respectively and such risk factors were compared to earlier case studies from other developing countries, namely China and Ghana. A preferred risk allocation scheme was developed using the “majority opinion” approach. The findings indicated that the public sector retains the majority of macro level risks, while the highest portion of meso level risks was held by the private sector. Twelve and thirteen risks for DWWT and SWD PPPs, respectively should be shared amongst the public and private sectors. Four risks should be handled according to the specific project circumstances. The identified risk allocation preferences were compared to 10 previous studies and results were discussed. The attributes affecting top significant risk factors were then identified through Delphi interviews and their weights were determined based on experts’ structured interviews. Two Hierarchical Fuzzy Logic Models (HFLMs) were developed for risk assessment of DWWT and SWD PPP projects, namely RA-DWWT-PPP and RA-SWD-PPP, respectively. Based on risk attributes ratings, both models provide individual risk factor ratings as well as overall project risk rating. The developed models are formed of Mamdani fuzzy logic controllers (FLCs), where fuzzy arithmetic and linguistic approximation were employed for the generation of fuzzy rules automatically, thus utilizing the benefits of fuzzy logic and avoiding excessively reverting to experts. Two case studies were utilized for the evaluation of RA-DWWT-PPP model, The first is a successful PPP experience, namely; New Cairo wastewater treatment plant (WWTP), while the second is Abu Rawash WWTP which was converted from the PPP scheme to a traditional Engineering, Procurement and Construction (EPC) form. The second project showed significantly higher risk rating than the first. The individual risk ratings of each project in comparison to the other were reasonably justified. However, as there are no SWD projects developed under the PPP scheme in Egypt, degeneracy testing was utilized for the verification of RA-SWD-PPP model. This research allows developing a better understanding of DWWT and SWD PPPs risks in Egypt. It is expected to help PPP practitioners capture critical risk areas and the attributes affecting their criticality, thus facilitate developing effective risk response planning and control. The developed risk allocation scheme allows constructing an effective risk allocation framework at early project stages, which in turn would evade prolonged contract negotiations and enable establishing more balanced contracts. Benchmarking findings to earlier studies is expected to help investors adjust their investment strategies by considering similarities and differences. In addition, the developed models serve as risk evaluation tools that enable PPP practitioners assess the overall risk rating of the targeted types of projects, as well as identify project risk areas of the highest concern. It is expected that this study shall help stimulate opportunities for executing DWWT and SWD PPPs in Egypt and direct other research endeavours in that field.