A.11 For standard accommodation projects, attaining completion generally marks a point of diminished risk for an Authority and the treatment at SoPC4 paragraph 3.9.1 follows: "in the ordinary course of events no public sector capital contributions should be made to the project, and no unitary charge should be payable, until the works have been completed and accepted".
A.12 Concerns about affordability have led to proposals from Authorities to make capital contributions to projects and to pay them earlier, in some cases prior to completion of construction (to lower the external financing requirement). Risk transfer is a cornerstone of PFI and the amount and timing of capital contributions should not undermine this.
A.13 Authorities should more generally consider the balance of incentives on the sponsors and lenders, in particular once the capital contribution(s) have been paid. See comments related to Payment Mechanism in Box 2.A.
A.14 Authorities are reminded that levels of subcontract security should remain at the same levels regardless of any public sector capital contribution. See SoPC4 paragraph 3.9.2.
A.15 It is possible that the risk characteristics of some complex projects, in particular those with challenging construction techniques, technological / commissioning risk, high operational gearing or volatile cash flows associated with demand risk, will make them unsuitable for any funding by Authority capital contributions.
A.16 All proposed capital contributions will be assessed by Infrastructure UK as part of the business case approval and derogations processes. Any proposed changes to capital contributions from what was assumed in the original OBC need to be reapproved by Infrastructure UK.