With increasing risk transfer from public to private sector within procurement contracts, the private sector's perception and pricing of risks becomes increasingly important. As experience of handling risk develops, adjustments are also made to the pricing of that risk transfer by both equity and debt providers.
In the case of projects with uncomplicated interfaces and low levels of innovation, there is evidence that private sector developers and contractors are delivering projects within their estimates and are able to demonstrate delivery of benefits. Basing cost estimates on past projects may lead to a slight negative optimism bias (i.e. conservatism).
However the unique, complex, innovative or publicly sensitive projects have not proved easy to deliver, especially where public sector interfaces are many and the core project objectives or delivery are affected by changes in political opinion. In the main this has manifested itself in longer negotiation times, higher pricing and poorer risk transfer to the private sector as compared to standard projects. Once a PFI project has achieved financial close, its chances of achieving its contractual objectives are good.