Retained risks have to be managed, and the cost of managing these risks should be reflected in the PSC, including the impact of the risk occurring. Retained risks are reflected principally in the output specification and are those risks in the service contract that could be allocated to the private sector, but are best retained by the public sector. Risks that are associated with services that are not expressly provided for in the output specification are of course excluded entirely from the PSC. If, for example, the public sector is to continue providing clinical services in a hospital project, this is not a retained risk in the PSC, because the private sector will not be providing these services in the partnerships contract.
The total cost of the risk to be retained by the public sector is added to the private sector bid when making comparisons. Typically, retained risks in the construction phase relate to matters such as a change of law or public policy, or where the Government assumes responsibility for site availability and planning approvals. In the operational phase, a retained risk may be a revenue sharing arrangement.