Government traditionally assumes most asset ownership risk during public procurement. Where privately-financed public private partnership projects differ is that asset ownership risks are allocated to the private party. By procuring services only, government generally allocates to the private party the whole of life costs of maintaining or upgrading/refurbishing the facility and the risk that the facility will become obsolete for technical, demographic or other reasons. Government is also relieved of the adverse effects on the asset value arising from force majeure events (except to the extent that they affect the provision of the contracted services) and from the impacts of wider market changes on the residual value of the asset.
This risk allocation may need to be modified in individual projects, depending on whether government retains ownership of the site, government's requirements for the particular site and/or the facility, and for its ongoing receipt of services at the end of the contract term. If government decides at the outset that it needs the site and/or facility - whether because the asset is an integral part of a public network, is integrated with other government operations, is critical for government's own service delivery or simply to preserve a strategic site - it must ensure that the project structure delivers it into government hands at an appropriate point, at an acceptable price and in an acceptable condition. This determination in turn affects the decisions made about government ownership or otherwise of the underlying land asset. If the asset is to revert to, or to be transferred to government at the end of the contract term, government is potentially exposed to residual value risk.