A standardised risk matrix framework has been included in this document (Appendix A). Its purpose is to illustrate the range of risks that may apply to each project phase for a privately financed public private partnership project and, broadly, to set out government's likely preferred position on allocation.
During the preliminary assessment, public private partnership business case development expression of interest and bid phases, the risk matrix can assist the government project team in listing all the relevant project risks and their proposed allocations. The risk matrix should encapsulate significant detail on the proposed risk management, mitigation and allocation that will then be developed into contractual mechanisms within the project agreements. The more exhaustive its treatment of the risks, the more useful and valuable is the matrix.
Risk matrices are widely used in the marketplace, however, it is important to recognise their limitations. For example, if used in a simplified form, risk matrices can misrepresent the actual allocation of risk accomplished by both the structure and detail of the contract. One example of their limitation occurs where the risk matrix contains ticks for a particular risk in both the 'government' and 'private party' columns. This says little about the detail of the allocation. The contract and the project structure, not the matrix, are the tools by which risk allocation is achieved.
A risk allocation matrix that is presented to the private party as part of the project brief need not (and in most instances should not) be as detailed as the risk matrix that is developed for internal purposes. It should be made clear to the private party that the allocation is offered for acceptance and does not represent an ambit claim.
Departures from the matrix that is included with the project brief should be minimised. Any departures should be shown as drafted amendments to the project agreements provided with the project brief and must always be shown in sufficient detail to allow government to fully understand them, and (where agreed to by government) to enable them to be drafted into the contract.