Some risks have crystallised very early in the STEPS deal. The Departments took some time to respond to these but sought good advice and now have a much clearer view of the risks involved. Measures are also being taken to improve the governance of the contract. However, effective risk management will be essential if the Departments are to realise full value. |
3.1 Our report Managing the Relationship to Secure a Successful PFI Deal highlighted the importance of good risk management in a PFI deal and the ways in which this can be achieved. Good risk management will result from a thorough appraisal of all the possible risks attached to a deal and the development of contingencies should the risks crystallise. Our report also highlighted the importance of developing a successful partnership-based relationship between an authority and a contractor. This relationship is assisted by the right contractual framework, which includes allocating risks appropriately, establishing clearly defined quality of service and value for money mechanisms, and building in arrangements to deal with change. It is also essential that both parties to the deal understand their respective objectives, assess the prospects for a partnership, and make efforts to understand each other's business. As a deal progresses, the risks inherent in it will change and risk management arrangements must be reviewed regularly as deal risks change over time.