In what areas do respondents consider that a change to the conventional PFI risk allocation as between the public sector authority, sponsors, funders and suppliers could reduce costs and/or improve the flexibility while still offering value for money? 

The following is an extract from SFT's contract user guide8 which sets out changes made from previous standard PPP contract forms. SFT believes as discussed elsewhere in this response that these will deliver better value for money for the public sector: 

The following material changes have been made to the risk transfer: 

o  Title risk (other than the risk of compliance with disclosed title information and/or Reserved Rights) is taken by the public sector (Clause 9 and Schedule Part 6).

o  Risk of capital expenditure arising from unforeseen change in law during the operational period is retained by the Authority (Clause 32). 

o  Energy usage and price risks are retained by the Authority, but service standards have been added to incentivise the service provider to do those things that significantly influence energy consumption and are within its control. 

o  Insurance premium risk sharing in relation to market-related changes has been dropped so that insurance premiums become mainly a pass-through cost, but measures have been added to ensure that the project insurances are procured on terms that represent best value for money for the Authority (Schedule Part 14 and Schedule Part 15).

The changes to risk transfer have been made to improve value for money in the belief that historically either little or no risk transfer was achieved in practice or else the risks transferred were being fully priced by the private sector and, therefore, paid for by the public sector whether or not the risk actually occurred. Changes of approach have also been adopted in relation to other risks: 

o  Energy efficient design will be a design requirement and will be managed through design review, monitoring during construction and testing by appropriate completion tests prior to handover. 

o  Vandalism (in schools) will be a public sector risk although the service provider will still provide the reactive maintenance to rectify damage due to vandalism, subject to reimbursement of costs. 

o  Internal decoration, window cleaning (and floor coverings) and Authority equipment are excluded from the maintenance service.  The Authority will have minimum periodic maintenance obligations for these items.  The service also excludes PAT testing of the Authority's electrical equipment. 

o  Variations are regulated by a version of the Change Protocol developed for the BSF programme in England.  The SFT intends to use experience from projects to produce a standard catalogue for Low Value Changes that it will provide as supplementary guidance in due course. The Change Protocol includes an option that allows the Authority to carry our certain very minor classes of changes for itself.