Risks arising from ineffective public sector management

Consequential risks can arise if the public sector does not meet its general (non‑contractual) responsibilities and mismanages the contract. These risks do not necessarily involve a failure by either party to perform its contractual obligations or impact upon the delivery of services in accordance with the output specification. They can, however, compromise the value for money outcomes of the project. They can also result in adverse political consequences for government, or damage to personal, organisational or broader government reputation.

Examples of such risks include:

•  take-back risk, which can result in government ultimately bearing the financial responsibility for project risks originally allocated to the private party. (This may occur, for example, where government fails to respond to a private party request within a contractual timeframe or where the government party engages in a pattern of behaviour at odds with the contractual arrangements); and

•  the inefficient use by the public sector of the contract outputs supplied by the private party in accordance with the output specifications.