When contracting to provide public infrastructure and related services, a private party may believe that the usual commercial risks are magnified because it is contracting with government. Government is seen as having special powers that 'imbalance' the commercial relationship between the two contracting parties. In particular, government's role in law-making is perceived as giving it the opportunity to 'change the rules'.
Government activities and determinations can affect all projects, regardless whether government is directly involved as a contracting party. The private party's exposure to the risks of government activities and determinations is perceived to be greater under public private partnership projects, however, given the direct contractual interest that government has in the project.
Such risks are termed legislative and government policy risks. Assurance is often required by the private party to reassure it that it is not in a position of unusual disadvantage. To establish a sustainable commercial relationship between government and the proponent, legislative and government policy risks should be mitigated as far as is reasonable. (For a fuller discussion of legislative and government policy risk, see chapter 11).