There are numerous risks that are typically allocated to the private sector in a highway PPP transaction. Under a D/B contract, the risk of compliance with the public sponsor's technical specifications (i.e., construction risk) is borne by the D/B contractor. In addition, the D/B contractor often agrees to complete the facility at a fixed price and within a specific time frame. This type of arrangement transfers both price risk and schedule risk to the private contractor. If the D/B contractor agrees to provide a warranty or accepts responsibility for operating and maintaining the facility after completion of construction, then the contractor would be accepting all quality risk.
To the extent a private contractor agrees to finance the construction of a tolled facility or agrees to operate and maintain a tolled facility pursuant to a long-term concession agreement, there are a number of risks that are typically allocated to the private sector. These risks include financing risk, traffic risk, and revenue risk. In addition, there are a number of risks typically assumed by the private concessionaire with oversight and the possibility of limited assistance from the public sponsor. For example, the private-sector operator will be responsible for compliance with the operating and maintenance standards and the "hand back" standards established by the public sponsor. The public sponsor will have oversight responsibility to ensure that the contractor is complying with these standards and will have the contractual right to compel the contractor to perform these responsibilities.