In PPPs, a risk should be borne by the party best placed to manage it, that is, the party that can best understand, control and minimise the cost of the risk. The private sector is generally in a better position than the public sector to handle and mitigate many of the typical PPP project risks (e.g. construction on time and on budget). There are however circumstances under which a "standard" risk allocation may not yield the full benefits of PPPs. This is where SGs may have a role to play.
SGs are a way for governments to incentivise the private sector (e.g. sponsors, banks, capital market investors, equity providers) to participate in PPP programmes or projects. SGs may take various forms and be aimed at an entire PPP market, specific programmes or simply individual projects. They have been a feature of PPP programmes for many years but, with the onset of the credit crisis in 2007, their use has become more prevalent and varied in nature. This paper draws on the now widespread experience of EPEC members in this field.