The opportunity for the private party to adopt innovative solutions to service needs is one of the key drivers in achieving value for money through a public private partnership. However, the benefits of innovation carry the risk that unproven technology will not deliver the intended results and will require further refinement. Although innovation risk falls primarily on the private party, (who will not receive payments, or will receive abated payments until appropriate outcomes are achieved), government also bears the risk that service provision or full service provision will not be achieved within its required timeframe.
In some cases, innovation risk may be priced at a high premium because the project is highly dependent on technology, with a high likelihood that the risk will materialise. Alternatively, the private party may see the contract as an opportunity to trial and demonstrate new technology and discount the risk premium to win that opportunity. In any event, government should ensure any premium paid for the option of unproven technology is not excessive compared to the benefits.
Whether it is a concern that government may be locked into a particular technology depends on the nature of the project. For example, it may be more of a concern in an IT-based project than for a building management services contract. In either event, since government inescapably bears some part of the risk, it is appropriate that government is treated equitably in respect of the future need it may have for the technology - whether within the facility (if the facility is ultimately to be transferred to government) or within other government facilities. Without laying claim to intellectual property in the technology or the upside benefits of its further commercial exploitation, government should seek contractual recognition of its right to future use of the technology on reasonable terms. This is to prevent undue advantage being taken of the fact that government may be locked in to a particular project technology, and to recognise that government has taken a share of the innovation risk and is entitled to some upside benefit.