Design, Construction and Commissioning Risk

Design and construction risk, incorporating asset quality and commissioning risk, fall substantially on the private sector. In identifying these risks, it is important to distinguish between the risk of cost overruns, which are primarily of a capital nature, and delays in commissioning the asset for use, which affects the recurrent contractual payments for services. In the former case, the private sector usually accepts this risk under standard procurement contracts where the Government is the owner of the asset. In the latter case, the private sector may not receive payment for services until the asset is in a fit state to meet quality standards, and may face contractual penalties reflecting the opportunity cost of the delay to Government.