(a) Although Change in Law is not a risk which the private party can control, in practice the private party is usually in the best position to manage the effects of Changes in Law and minimise their impact on the business. For this reason, a sharing approach, using specified thresholds to cap the private party's exposure, is often the most equitable way to ensure that the costs of implementing Changes in Law are minimised. Risk sharing, particularly on a threshold basis, should provide the private party with the incentive to minimise the cost of implementing the change (as opposed to simply invoicing government for whatever it costs), reduce any concern the private party may have that government may take advantage of the situation and also enable the private party and its financiers to quantify the private party's maximum exposure.
(b) Both government and the private party should seek to ensure that cost and adequate risk transfer are balanced as far as possible to achieve the best value for money on a particular project. The threshold figures agreed and the number of graduated steps will take into account the size of the project and the impact of other factors, such as the likelihood of environmental and health and safety legislation. The competitive bidding process should encourage bidders to accept realistic maximum thresholds and competitively price general Change in Law risk.