You're the infrastructure director at a construction firm in Santiago, evaluating a public-private partnership (PPP) to build and operate a major project. The contract on offer has an attractive headline: broad scope, a juicy fee. But a PPP's success or failure isn't decided by the headline — it's decided by how the risk is allocated, and Boston's Big Dig and the UK's PFI hospitals showed what happens when it's allocated badly.
The situation
A PPP succeeds or fails for one reason alone: whether each risk is assigned to the party best able to manage it. Construction risk should sit with whoever builds (they control design and execution); demand risk with whoever can influence it or share it; regulatory risk with the public sector. When the allocation is good, total cost falls and everyone wins. When it's bad, someone ends up carrying a risk they can't control —and pays dearly for it.
Here's the trap. Two contracts can look identical on paper —same headline, same fee— but their real value depends entirely on the quality of the allocation. Boston's Big Dig left cost overruns in the public sector's hands; the UK's PFI hospitals transferred little real risk and chained the state to decades of high payments, until political backlash forced renegotiations. For you, as the private partner, the mirror-image danger is signing a contract that looks good but leaves you carrying risks you don't control —construction overruns that don't depend on you. The defensible move is to structure the allocation, not sign the headline: each risk to whoever controls it, and refuse the risk you can't manage.