The risk allocation approved by government is reflected in the project agreements. It is essential to ensure that the contract is performed in accordance with the terms of risk allocation and that each party discharges its respective obligations. Failure to do so is contrary to the approval given by government and has the potential to diminish the value of the project.
In addition, it is imperative to ensure that actions, or inaction, by the contract management team does not result in government implicitly taking back some of the risks allocated to the private party in the project agreements.
In the event of a project failing to deliver services in accordance with the performance specifications, the remedies available to government will be clearly defined in the project agreements. The project agreements should comprehensively take into account the implications of non-performance and thereby ensure there are no legal grounds for either party to seek alternative remedies. This should ensure that a value for money outcome is achievable for government, even in circumstances where a project encounters performance difficulties.
Government should refrain from engaging with the project proponents other than as prescribed within project agreements. However, it is recognised that in exceptional circumstances, variations to the project agreements or waivers of rights may be an appropriate response to ensure the government's value for money outcome. The appropriate delegate should approve any such variations in advance.