Defined as: "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."
On balance, have the majority of these risks been transferred to the private sector? If yes, then departments should move to consider the transfer of demand and availability risk. (Further discussion of construction risk is included in section 3.2.3 of the technical guidance.)
Box 2 in 3.2.5 of the technical guidance also considers how the level of Government finance provided to a PFI type project impacts on the construction risk transferred to the private sector. Where the public sector funds, lends or guarantees a majority of the cost, then the construction risk has not been transferred.