Risks and Strategies for a Build-Own-Operate International Airport Project in India

Risks and Strategies for a Build-Own-Operate International Airport Project in India

Daly Paulose (School of Business, SCMS Educational Institutions Group, Kochi, Kerala, India)
Copyright: © 2013 |Pages: 17
DOI: 10.4018/ijrcm.2013010101
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This is a retrospective case study of applying risk management in a well-known successful build-own-operate (BOO) mega-project. The participants were the project team of the Cochin International Airport facility which was developed in India. This project is a world class monument of strategic vision and exemplary risk management, orchestrated as a public-private-partnership (PPP). The novelty is that this is the first time a large risky international airport BOO mega-project has been successful and then published in the literature. The project was delivered at a total cost of about Indian National Rupees (INR) 283,00,00,000 (with all phases included), while other airports built later on the same PPP model, namely those at Bangalore and Hyderabad, cost over INR 2000,00,00,000 (almost 10 times more).
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In the large facilities construction industry, build-own-operate (BOO) projects have a high risk of failure because of the inability for organizations to control uncertainty (Kerzner, 2011). In a BOO mega-project organizations use their internal resources since funding is usually limited for outsourcing all phases of designing, building, and operating a large facility. Generally the organizational project sponsors are also trying to expedite the project by integrating or fast-tracking the design-build-operate phases using the same resources to avoid losing momentum during knowledge transfer (Strang, 2012a).

In a build-operate-transfer (BOT) approach, the project sponsors transfer the risk to a private company to operate once the facilities are completed. However, in a BOT project the company still integrates all phases up until the facility is ready for business, to speed up the construction (Kerzner, 2011).

Other methods such as construction management, design-build, or design-bid-build are used when specialized resources are needed, but this is usually at the expense of a longer duration, or higher costs if external resources are needed (Yoon & Han, 2006; Strang, 2012a). These approaches are conceptually illustrated in Figure 1, showing that using more internal resources will usually increase risks and managing more of the design-build phases internally typically reduces the time-to-market (project duration).

Figure 1.

Risk vs. time for construction project strategies


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