EDHECinfra Paper
How much construction risk do sponsors take in project finance?

Using new data, we show that construction risk in infrastructure project finance is well- managed and that project sponsors face very little construction risk compared to the well-documented, systematic and very large costs overruns found in traditional infrastructure project procurement.

We know from the project management literature that construction risk is significant in public infrastructure projects delivered through traditional procurement methods. We also know that, when similar projects are procured using project financing, construction risk is passed on through date-certain, fixed price contracts. However, there is, to our knowledge, no available empirical research on the significance of construction risk once it has been passed on.

Author(s):
EDHEC-Risk Institute Publication
2014 (August)
infraMetrics™ by EDHECinfra

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