Government's strong preference is that demand risk be allocated to the private party, even where government itself is the service consumer and is delivering core services from privately-provided and serviced infrastructure. However, the extent to which demand risk is allocated to a private party under a public private partnership project depends on the value for money question.
The degree of the private party's exposure to lower returns through lower-than-expected demand depends on the extent to which the project is market-exposed, i.e. whether government has contracted to pay for a specified quantity of the service (based on availability or capacity), or whether the payment mechanism relies wholly on usage. Where government is purchasing the services from the private party and therefore has control over the level of service demand, it is not optimal to structure the payments to include a significant usage component. Nevertheless, wherever possible, there should be a volume component with some volume risk being borne by the private party.