Design, construction and commissioning risk is the risk that the design, construction or commissioning of the facility (or certain elements of those processes) is carried out in a way that results in adverse consequences on cost and/or service delivery.
Specific examples of design, construction and commissioning risk are:
• the risk that the facility as constructed is unsuitable for the delivery of both the contracted services and the core services provided by Government
• the cost of complying with environmental and planning conditions and ensuring that construction and commissioning of the project does not inadvertently cause environmental harm
• the risk of defects arising in the facility
• the risk of delays to the completion of construction.
These risks are particularly salient in relation to the facility’s fitness for purpose. To minimise Government’s exposure to such risks (except where the agency has statutory responsibility for design and operating standards), agencies should avoid heavily specifying or formally endorsing a design.
Design, construction and commissioning risk should be allocated to the private party as part of the private party’s acceptance of solution risk (i.e. that the solution - including design, construction programs etc - is capable of meeting the contractual requirements of Government. This includes the requirement to complete and commission the facility by the appropriate target dates.
In certain cases Government may consider accepting certain aspects of design, construction and commissioning risk by granting relief to, or compensating, the private party with respect to certain events.
Further information on the circumstances in which Government may accept limited Design, Construction and Commissioning risk is provided in Chapter 5 (Environmental issues), Chapter 7 (Planning and other approvals), Chapter 10 (Design), Chapter 11 (Construction and Completion), Chapter 12 (Relief), Chapter 13 (Force Majeure) and Chapter 14 (Compensation) of the Risk Allocation and Commercial Principles for PFPs.