3.46 In the first instance, if a PFI contractor fails to deliver the project on schedule or the services provided fall below the standard originally specified, deductions and penalties will be withheld from payments made by the public sector.
3.47 The loss of revenue resulting from deductions and penalties provides a powerful incentive for the PFI contractor to remedy any shortcomings in service delivery. Shareholders will see a decline in their returns, third party credit providers will be concerned that this loss of revenue will increase risk that the PFI contractor will be unable to meet its debt service obligations. In these circumstances credit providers have contractual rights over the other private sector participants in the project, which can enable them to enforce performance against contractual obligations. Credit providers can replace the private sector participants in the PFI with other companies better able to deliver to the required standard.
3.48 Furthermore, even in circumstances where there is not default, under a PFI contract the Government retains the right to step in to take over the operation of the services being provided by the PFI contractor:
• if the Government determines that there is a serious risk to the health or safety of the public;
• if the Government determines that there is a serious risk to the environment;
• where the Government is required to exercise its statutory responsibilities; or
• if the Government determines that the project may have implications for national security.