5. Is there significant risk transfer to the private sector or is it more apparent than real?
5.1 Risk transfer to the private sector is genuine and at about the right level, given that under LIFT the private sector is contractually required to cover the costs of cost over-runs, the ongoing maintenance of projects and must ensure the facility is in as good a condition after 25 years as it was when built. The contractual structure put in place by the public sector ensures the appropriate transfer of risk to the private sector.
5.2 Given that the risk management process of projects is effectively managed by the private sector, the risk transfer may not always be apparent; for example, and as mentioned above, the private sector tends to bear the costs of an initial higher-quality build and take greater care in the design and planning stages in order to avoid higher costs of maintenance, to future-proof facilities and to avoid being penalised. The benefit of PF/ PPP models is that the public sector derives value from this higher level of service which is reflected in the costs.
5.3 There would be a major risk transfer in a disaster scenario, though this is clearly a rare occurrence.