11. There is considerable risk transfer to the private sector, which in our view has been demonstrated to be effective. We are aware of a number of Private Finance projects where the private sector has faced difficulties in delivering on its commitments to the public sector, but worked hard, at a cost, to overcome those difficulties. This is evidence of risk transfer at work in an effective manner.
12. The three Private Finance projects that in our estimation have categorically failed are the National Physics Laboratory4 and the two Metronet London Underground Limited PPP projects.5 Our understanding is that these failures occurred due to misallocation of risks to the private sector that it was unable to control, manage and absorb. It is our view that a carefully considered risk allocation is a fundamental premise of a successful Private Finance project.
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4 NAO (2006) The Termination of the PFI Contract for the National Physical Laboratory.
5 NAO (2009) The Department for Transport: The failure of Metronet.