3.30 The Government's approach to risk in PFI projects does not seek to transfer risks to the private sector as an end in itself. Where risks are transferred, it is to create the correct disciplines and incentives on the private sector to achieve a better outcome. The general principles behind the Government's approach to risk-sharing in PFI are:
• the Government underwrites the continuity of public services, and the availability of the assets essential to their delivery; but
• that the private sector contractor is responsible, and at risk, for its ability to meet the service requirements it has signed up to. Where it proves unable to do so, there are a number of safeguards for the public sector and the smooth delivery of public services in place, but the contractor is at risk to the full value of the debt and equity in the project; and
• the full value of that debt incurred by the project, and the equity provided by contractors and third parties, is the cap on the risk assumed by the private sector.
3.31 Successful PFI projects should therefore achieve an optimal apportionment of risk between the public and private sectors. This will not mean that all types of risks should be transferred to the private sector. Indeed, there are certain risks that are best managed by the Government; to seek to transfer these risks would not offer value for money for the public sector.