Risk sharing for PPP project in construction waste recycling industry in China

Abstract

With the deepening urbanization, urban renewal, and reconstruction movement in China, a large amount of construction waste has been generated. In order to ease the financial pressure on the government to deal with construction waste, introducing the PPP model in the construction waste recycling industry has become popular. Based on the theory of system dynamics, this paper studies the risks of using the PPP model in construction waste recycling industry. First, a causal loop diagram was depicted according to the interaction of the main risk factors. Then, using the system dynamics software Vensim, a dynamic model of the risks of the PPP project was constructed. The results show the following: (1) the PPP project in the construction waste recycling industry is profitable; (2) For the PPP project in the construction waste recycling industry, the tendering risk will break out in 6~7 years, the greatest impact on tendering risk is the cooperation environment risk, where cooperation environment risk entropy is increased by 50% and tendering risk entropy is increased by 53.66%; (3) Construction risks will break out in 7~8 years. The construction cost, construction delay, and design defects have the greatest impact on construction risks, where entropy is increased by 50% and construction risk entropy is increased by 19.30%, 19.25%, and 19.08%, respectively; (4) The operational risk has not broken out in 10 years and is expected to break out in 10 to 20 years. Raw material power supply, production technology level, and operations management efficiency have the greatest impact on operational risk, where entropy is increased by 50% and operational risk entropy is increased by 21.52%, 20.84%, and 20.76%, respectively. These results can provide suggestions and references for the risk management of PPP projects in China's construction waste recycling industry.

Keywords: Construction Waste recycling; PPP (public–private partnership); Risk; System dynamics.