The most commonly used and readily available risk mitigation option for Private Parties is to pass the risk on to other parties who are able to control it at a lower risk premium. This supplementary risk allocation creates a chain of risk bearers, each best placed to control the particular risk, and each insulated from the collective risks the private party would otherwise have to bear. In this situation, however, it is important to point out that, notwithstanding the chain of risk bearers, the private party (as the contracting party) still retains the primary liability for the risk under the contract.
Typically, the private party would contract with:
• a builder who would bear the construction/completion risks
• a facility operator who would bear the operating risks
• a supplier of input materials who would bear the risk that the quality of the materials is adequate to meet the project needs.
Other risks, including demand or market risk, might be shared with the private party's financiers. Risk is further reduced if the private party chooses the best and most experienced partners for each aspect of project delivery.