Risk Category | Description | Consequence | Preferred allocation | Mitigation |
Site Risks | ||||
Existing structure (refurbishment/ extensions) | The risk that existing structures are inadequate to support new improvements. | Additional construction time and cost. | The private party will be able to commissioning expert engineering can be used to assess and cost the this risk in its bid. | |
Site conditions | The risk that unanticipated adverse ground conditions are discovered which cause construction costs to increase and/or cause construction delays. | Additional construction time and cost. | Generally this risk will be allocated to the private party. However in certain circumstances it may be appropriate for Government may accept some site risk, see Chapter 4 (Site conditions and suitability) and Chapter 5 (Environmental issues)of the Risk Allocation and Commercial Principles for PFPs | The private party can mitigate and through site inspections, testing and due diligence. |
Approvals | The risk that necessary approvals may not be obtained or may be obtained only subject to unanticipated conditions Which have adverse cost consequences or cause prolonged delay. | Delay in works commencement or completion and cost increases. | The private party, unless Government assumes this risk (refer to Section 3.2.4.) | Refer to Section 3.2.4 for ways of mitigating planning approval risk. |
Environmental (1) | The risk that the project site is contaminated requiring significant expense to remediate. | Clean-up costs and delay (recognising that the ultimate responsibility for clean-up remains with the polluter, if available). | Generally this risk will be allocated to the private party. However in certain circumstances it maybe appropriate for Government to accept some contamination risk. For further guidance on when Government may accept some contamination risk, see Chapter 5 (Environmental issues) of the Risk Allocation and Commercial Principle for PFPs | The private party can mitigate this risk by commissioning expert reports and possibly through insurance |
Environmental (2) | The risk that prior to financial close offsite pollution has been caused from a Government preferred site to adjacent land. | Clean-up liability (recognising that the ultimate responsibility for clean-up remains with the polluter, if available). | Government may assume responsibility by way of indemnity or obligation to compensate for unidentified off-site pollution pre-financial close where the site is a Government site. | Government can mitigate this risk by commissioning contamination reports, given that Government should also have greatest knowledge of the past uses of its site |
Environmental (3) | The risk that prior to financial close (in the case of a non-Government site) or after financial close (for either a non Government or Government site) off-site pollution is caused to adjacent land. | Clean up liability (recognising that the ultimate responsibility for clean-up remains with the polluter, if available). | The private party. | The private party can manage this risk by controlling activities on the site after financial close. |
Clean-up and rehabilitation | The risk that the use of the project site over the contract term has resulted in a significant clean up or rehabilitation obligation to make the site fit for future anticipated use. | Financial liability on residual owner (recognising that the ultimate responsibility for clean-up remains with the polluter, if available). | Generally this risk will be allocated to the private party (whether Government is to resume possession of the site or not), except to the extent that Government has accepted contamination risk. | The private party can mitigate and manage this risk by managing the use of the asset. Government may require sinking funds if it is to resume the site and its use is liable to result in significant clean-up / rehabilitation cost. |
Native title | The risk of costs, delays and compensation or risk of injunction and/or invalidity of approvals. | Delay, cost and compensation. | Government will usually accept this risk on Government preferred sites. | Government can mitigate and manage this risk by searching relevant registers, making enquiries if appropriate and where required, obtaining expert advice. There are also a number of mechanisms available under the Native Title Act 1993 (Commonwealth). |
Cultural heritage | The risk of costs and delays associated with archaeological and cultural heritage discoveries. | Delay and cost. | Government will usually accept this risk on Government preferred site. Where the private party chooses the site, this risk will be allocated to the private party. | This risk can be managed and mitigated by searching relevant registers, making enquiries if appropriate and where required obtaining expert advice. |
Availability of site | The risk that tenure/access to a selected site that is not presently owned by Government or the private party cannot be negotiated. | Delay and cost. | The private party, as it makes the decision to bid on a non-preferred site. | This can be mitigated by requiring bidders to secure access to the site prior to contract signing. |