2.5 Final Risk Matrix

We have identified more than 80 material risks for large, complex public infrastructure projects of the type delivered by Infrastructure Ontario. These risks are grouped into 10 major categories as listed in Appendix "B". When the risks are evaluated in the context of a typical public infrastructure project, it is our view that the value of the risks under traditional delivery (i.e., a Canadian Construction Documents Committee Stipulated Price Contract, or CCDC2 arrangement) and under Infrastructure Ontario's Design, Build, Finance & Maintain delivery model are as set forth in Appendix "B".

It is worth noting that reduced risk does not necessarily translate directly into value for money; it is rather an essential component of the value for money analysis. In order to determine whether value for money may be achieved, the reduced risks of the Design, Build, Finance & Maintain model have to be weighed against any additional costs.

Appendix "B" shows that, in an average project, the public sector retains approximately 76.5% of the base construction costs in risks under a traditionally‐delivered project versus 16.2% under a Design, Build, Finance & Maintain delivered project. The table in Appendix "B" also shows that the majority of the risks that are reduced by using Design, Build, Finance & Maintain can be classified as risks relating to policy and strategy, design & tender, construction, life cycle and residual risk, and operational risk.

Policy / Strategic risks relate to government approvals and changes in law, policy or funding. On average, the Design, Build, Finance & Maintain model can reduce these risks from roughly 20.4% of the base cost (the total contract value, excluding financing for this category) to 5.6%.

Design and Tender risks include architectural and procurement risks. On average, the Design, Build, Finance & Maintain model can reduce these risks from roughly 19.4% of the base cost (the design & construction portion of the contract for this category) to 1.7%.

Construction risks relate to site conditions, labour, resource availability, permits and approvals, delays and commissioning. On average, the Design, Build, Finance & Maintain model can reduce these risks from roughly 16.6% of the base cost (the design & construction portion of the contract for this category) to 1.4% of construction costs.

To give an example of how this occurs, consider the construction risk of design coordination and completion. This is the risk that change orders are issued during construction due to design coordination/design completion/design gaps, and includes the risk that method of pricing of change orders is not fully prescribed in the contract resulting in change order costs exceeding estimated amounts. In our view, the probability of this occurring under both the traditional delivery model and Design, Build, Finance & Maintain is 90%. The typical impact of this occurring under the traditional delivery method is 2% of the base cost (the design & construction portion of the contract for this category), and under the Design, Build, Finance & Maintain model is 1% per cent.

The table below illustrates how these assumptions would translate into quantification of the risk associated with design coordination and completion under traditional delivery and under the Design, Build, Finance & Maintain model.

The table above shows that by delivering a project using Design, Build, Finance & Maintain as opposed to traditional delivery, the risk associated with design coordination and completion is reduced to zero, as this risk has been transferred to the Project Co..

Life Cycle and Residual Risk relate to maintenance of the physical building. On average, the Design, Build, Finance & Maintain model can reduce these risks from roughly 132.8% of the base cost (the maintenance portion of the contract for this category) to 46.1%.

Operational risks include technological obsolescence, quality and unanticipated operating costs. On average, the Design, Build, Finance & Maintain model can reduce these risks from roughly 51.5% of the base cost (the operations portion of the contract for this category) to 0.3%.