The procedure for determining risk allocation is as follows:
Step 1: Identify all project risks. These include the general risks (described in detail in part two) and the project-specific risks (for example, the risk to public health in a water project).
Step 2: Identify the core services that are to be provided by government and for which risk cannot be allocated to the private party.
Step 3: Examine each remaining risk and identify those:
- government is best placed to manage
- the private party is best placed to manage
- over which neither party has control
- identify the optimal allocation of the risk (as per section 3.5.3)
Step 4: Determine whether any of the remaining risks should be shared in accordance with market convention or specific factors relating to the project.
Step 5: Fine tune the risk allocation in the public private partnership structure in light of steps 3 and 4 and use the contract to adjust any imbalance between the parties.