If a major risk that is allocated to the private party eventuates and the private party cannot effectively deal with it, it will be vital for government to be able to ensure continuity of service. One example might occur where, in a privately financed public private partnership, the special purpose vehicle becomes insolvent. A contingency plan should be prepared, ready for implementation if the project becomes unviable. This plan is to be consistent with the contract provisions for default, step-in and termination.
The plan should, however, extend beyond the contract provisions to consider government options after step-in or termination, and strategies for dealing with major force majeure events that the private party is unable to redress.
The contingency plan needs to consider potential pressures on government to continue to provide core services and any ancillary services. The contingency plan should also include a strategy for communicating events and progress to the public.
If service is disrupted, the cause, extent and likely duration of that disruption will determine the steps to be taken. For example, if the private party fails to deliver a contracted service, but the particular contracted service and any affected core service (as appropriate) can be delivered effectively at another site or by another party, the private party should pay any additional cost to government of the alternative arrangements. If the service is disrupted and the private party cannot restore the service within the applicable cure periods, government may require step-in rights to restore the service. The need for government to exercise its step-in rights may depend on whether the private party's financiers have prior step-in rights that they wish to exercise in order to minimise the abatement period.