Nr | Question | YES | NO | User comments | Reference to MGDD | |
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VII. Demand risk This risk covers a shift of demand not resulting from inadequate or poor quality of the services provided by the partner or any action that changes the quantity/quality of the services provided. Government will be assumed to bear the risk where it is obliged to ensure a given level of payment to the partner independently of the effective level of demand expressed by the final user, rendering fluctuations in the level of demand irrelevant to the partner's profitability. However, this statement does not apply where the shift in demand results from an obvious government action, such as decisions of units of general government (and thus not just the unit(s) directly involved in the contract) that represent a significant policy change, or the development of directly competing infrastructure built under government mandate. However, because the assurance of this level of payment is normally provided through a minimum revenue guarantee or a guarantee of minimum demand (provided by government), such provisions need careful analysis. | Eurostat | |||||
62 | Are the government payments mainly linked to the actual use of the assets? |
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| If the answer is "yes", the demand risk would be a core feature of the analysis of risk sharing. If "no", government is assumed to bear this risk. | VI.5.3.2/38 |
63 | Does the final user have a free choice as regards the service provided by the partner? |
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| If the answer is "no", the demand risk is not applicable to the risk analysis and it is on the government side. This is the case if there is a lack of alternative infrastructure. This applies of course to facilities such as prisons, but it may also be the case for hospitals or schools under certain conditions, and in some cases sports and cultural infrastructure. | VI.5.3.2/36 |
64 | Is government obliged to ensure a given level of payment to the partner independently of the effective level of demand expressed by the final users, rendering fluctuations in the level of demand irrelevant to the partner's profitability? |
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| If "yes", government is assumed to bear this risk. | VI.5.4.2/85 |
65 | Does the private partner bear the costs due to the variability of demand (effective use by end-users), irrespective of the cause? |
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| VI.5.1/5 |
66 | Is the variability of demand due to the behaviour (management) of the private sector partner (e.g. due to inadequate quality of the services provided by the partner)? |
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| VI.5.4.2/85 |
67 | Does the private partner bear the costs if they result from such factors as the business cycle, new market trends, a change in final users' preferences or technological obsolescence? |
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| VI.5.3.2/36 |
68 | Is the partner able to manage an unexpected decrease in its revenue by various actions under its own responsibility, such as increasing promotion, diversification, redesign, etc.? |
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| In this respect, the partner is carrying out its activity in a commercial manner. | VI.5.4.2/86 |
69 | Is the partner allowed under the contractual clauses to use the assets for purposes other than those that have been agreed with government? |
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| If this is the case (of course, within certain limits), it is frequently an indication that the partner is effectively bearing the demand risk. | VI.5.4.2/86 |
70 | Does the contract allow the absence of an adjustment in the regular payments or even a compensation payment to the partner? |
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| If the answer is "yes", it would not necessarily imply the recording (or reclassification) of the PPP assets on the government balance sheet if the shift in demand results from an obvious government action, such as decisions by government (and thus not necessarily only by the unit(s) directly involved in the contract) that represent a significant policy change, or the development of directly competing infrastructure built under government mandate. | VI.5.4.2/87 |
71 | Are there exceptional "external" events that might have a significant impact on the level of the demand? |
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| If "yes", such risks can be retained by government without requiring the classification of the asset on its balance sheet. They must be considered under very restrictive conditions and should be limited to those for which insurance coverage is not available on the market at a reasonable price. | VI.5.4.2/88 |
72 | Does government bear the demand risk? |
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| Government bears the demand risk if the answer to question 62 or 63 is "no" or if the answer to question 64 is "yes". Questions 65 to 70 provide additional elements to be taken into account in the risk analysis. | VI.5.1/5 |