The MGDD defines the primary risk factors as follows (MGDD Part IV, 4.2, section 2a):
- "Construction risk: covers events related to the initial state of the involved asset(s). In practice it is related to events such as late delivery, non-respect of specified standards, significant additional costs, technical deficiency, and external negative effects (including environmental risk) triggering compensating payments to third parties;
- "Availability risk: covers cases where, during the operation of the asset, the responsibility of the partner is called upon, because of insufficient management ("bad performance"), resulting in a volume of services lower than what was commercially agreed, or in services not meeting the quality standards specified in the contract;
- "Demand risk: covers the variability of demand (higher or lower than expected when the contract was signed) irrespective of the performance of the private partner. In other words, a shift of demand cannot be directly linked to an inadequate quality of the services provided by the partner. Instead, it should result from other factors, such as the business cycle, new market trends, a change in final users' preferences, or technological obsolescence. This is part of a usual "economic risk" borne by private entities in a market economy."
The paper now considers the MGDD primary risk factors, and their constituent parts in more detail.