3.33 In a PFI, the risks which the Government usually seeks to transfer by contract to the private sector over the term of the contract, typically 15-30 years, are specifically identified and limited. In a typical PFI, these would involve the following:
• meeting required standards of delivery. So if, for example, the project's design was unable to provide the required service needs, the private sector would need to pay the cost of rectifying the design to meet those requirements and receive payments;
• cost overrun risk during construction. If, for example, ground conditions are discovered to be unstable after construction begins, and the building requires considerably more extensive foundations, the private sector would need to cover those extra costs in order to complete the building to the required standard. There would be no increase in the Government's unitary charge payments. In conventional procurement, the Government would be forced to cover these costs;
• timely completion of the facility. If, in the example of unstable ground conditions cited above, the facility was completed and delivered late to the public sector, no payments would be made to the private sector until it was available. Chapter 4 details research demonstrating the impact of this risk transferral on construction performance;
• underlying costs to the operator of service delivery, and the future costs associated with the asset. For example, where the private sector takes on an existing building in a PFI project, it takes the risk of any latent defects in the building requiring remedy. The private sector would need to make these remedies, and cover the cost of them, to continue to receive payments for the building's availability;
• risk of industrial action or physical damage to the asset; and
• in limited cases, certain market risks associated with the scheme (for example, in some road schemes, the actual traffic which uses the road).