The costs of maintenance and any refurbishment needed during the life of the contract are borne by the private party. This is one of the cornerstones of value for money in private provision of public infrastructure.
Maintenance schedules and periodic refurbishment should be incorporated into the service criteria governing the payment regime and performance of these obligations should be monitored. This is especially important where government retains ownership of the asset or is to assume the asset at the end of the contract term.
One mechanism for undertaking such monitoring, while minimising intrusion on the private party, is for the parties to agree that government may carry out or procure a survey of the asset, if it reasonably believes that maintenance and performance obligations as set out in the schedules are not being fulfilled. To prevent abuse of this power, the number of surveys that may be conducted over a given period will be strictly limited. An agreed independent party should undertake this asset survey.
Because the anticipated costs of maintenance and refurbishment are priced into the service charge, the private party generally builds up a substantial sinking fund over time, in anticipation of significant capital expenditure at future intervals. While government should not require rights over the sinking fund, where the asset is to be transferred to government in the event of early termination, the contract should provide that, on early termination, either the balance of the fund is to be paid to government to assist it in discharging the maintenance liabilities it will inherit, or the amount is to be offset against any termination payment required from government.