Type of risk | Allocation | Comments |
Operation |
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8 Defence Management's charges are out of line with market rates. | Shared | Once the new facilities are open, Defence Management can reset its charges for seven of the nine support services in year 12 of the contract, and every ten years thereafter, after it has market-tested these. |
9 Utilities and other pass-through costs are more than expected. | Department | Defence Management will arrange for the provision of these items at the lowest available price and the Department will reimburse the cost of these. The Department reserves the right to buy these items itself (paragraph 2.42). |
10 Defence Management fails to meet performance standards. | Deductions are made to Defence Management's fee if its performance in providing the required support services is poor. Although there are initial limits on the deductions that can be made, if performance is sufficiently poor, payments can be suspended until there are improvements. The Department also has the right to terminate the contract. There are however certain circumstances where Defence Management is not penalised for its poor performance (Appendix 4). | |
11 Maintenance of insurance cover during operation. | Shared | Defence Management is required to take out certain insurance cover. If the insurance required becomes unavailable on commercial terms due to no fault of Defence Management's, then the Department may choose to pay the increased costs of this insurance or waive the requirement on Defence Management to take out this cover. |