Orientation Risk Management Model for Pre-Bidding Process in Low-Income Housing Projects With Public Private Partnership in Vietnam

Although PPP is not a new approach to access infrastructure capital mobilizing in the world, this model has just applied in Vietnam since 2000s (DPI, 2010). The incompletion framework of PPP is one of the barriers that private sector could not be accessed to low income housing projects. As a result, there are only 6 projects which have been launched until 2009 Ngan Ha (2010, Jan 21), and all of them had an investor collection process without tendering process. This reality is not only “crowding out” private participation but also increasing the overall risk to the GOV in its PPP program (WB, 2008).

In order to improve this situation, in early 2010, GOV issued new 108 Decree to replace 78 Decree which was applied before. Thus, PPP procurement process is now clearer than before. Project partner must be selected through transparent tender bidding & negotiation phase. Hence, with the new regulation, risk evaluation plays a critical role in pre-bidding period.

Nevertheless, according to World Bank report (2008), in Vietnam current situation, ‘projects are not very well developed before they are bid out’. This is a key point needed to be thoroughly comprehended by stakeholders if they do not want to be ineffective of PPP program.

Mr. Vu Tuyet Mai made a research to find out the answer for the following questions:
1. What are the risks included in pre-bidding process for every aspect of PPP stakeholders who have difference objectives, functions, risk perception, how to manage those risks properly based on stakeholder’s competence and experience?

2. What is the existing risk management model which is used by stakeholders in the PPP low income housing projects running without bidding process in Vietnam?

3. What are the basic differences and how to capture the new risk management model from existing one?

The objectives of his research were to: (1) investigate risk factors can occur in pre-bidding stage for stakeholders of PPP low-income housing projects when apply the new regulation in Vietnam; (2) find out the existing critical risk factors in pre-bidding stage of low-income housing project in Vietnam; and (3) develop the risk management model in pre-bidding stage to help PPP stakeholders to achieve individual and project objectives under the new regulation.

Conclusion

Even though PPP model is familiar to infrastructure projects in general and low income housing project in particular around the world, it was just piloted in Vietnam recently, and now is in the improvement process. In parallel with gradual correction of policy system is the comprehension of related partners in project structure about risk management orientation. Hence, the goal of this thesis is pursuing this orientation to partly contribute to the completion process.

The result of the first objective is that the risk factors can face stakeholders in LIHPs would be investigated follow bidding process which should be applied in PPP practices. Thus, public sector plays the most important role in pre-bidding process and takes responsibility of social outcome. As a result, they take 19 risk factors in whole pre-bidding process, much higher if it will compare with 7 risk factors of private sector and debt funder.

The result of objective number 2 is that although all LIHPs in Vietnam now have not applied bidding regulation, those were analyzed exposed the real process of investor selection and their risk management related. In other words, those showed the evidences of real risk factors occurring now. Also, the ways stakeholders managed them and their result have been investigated.

For the last objective, the orientation model not only reduces many risk factor sprang from current selection process, but also recommend the solution to solve the risk related with policy and regulation in Vietnam now.

His thesis abstract is copied and posted.

Abstract

Risk management issue becomes more and more important in low income housing projects in Vietnam, especially in the transitional period of improvement of policy in recent years. Pursuing the suitable risk management model in pre-bidding process which needs to be applied from now as ruled in new regulations is the main propose of this thesis. In order to catch up requirements in pre-bidding, every stakeholder has to face with some determined risks to meet their needs. Moreover, current investment condition in low-income housing projects has contained many existing risk. Therefore, combination between risk simulation in pre-bidding and risk occurring could show the orientation of risk management model for the near future.

The thesis used methodology of case study analysis. After finding out risk factors in pre-bidding and verifying by experts, two most typical projects that run by PPP scheme have been chosen to analyze. The result of study shows that low-income housing project in Vietnam were challenged by many risk factors. They were caused by either current process of investor appointment or existing vague regulation and policy. For this reason, the thesis oriented the risk management model in order to reduce the main risks factor and transfer some risks to the sector enable to manage well. Obviously, this model needs to be perfected gradually through project by project and period by period. At least, the first model of risk management can help stakeholder to optimize their interest in low-income housing project with applying bidding process instead of investor selection before.