A priority service should be undertaken as a public private partnership project if it offers the state a better value for money outcome, compared with delivery of the project by traditional government procurement.
Value for money is maximised by allocating risk optimally. The governing principle of a project's risk allocation dictates that risk should be allocated to the party best able to manage it. Such optimal allocation reduces individual risk premiums and the overall cost of the project, because the party in the best position to manage a particular risk should be able to do so at the lowest price.
It is not the government's intention under this policy to attempt to transfer all project risk to the private sector, as it recognises that the inappropriate transfer of risk will generate and carry a significant premium. (Optimal risk allocation and its application in public private partnerships are explored in detail in Chapter 3).