Risk category

Description

Consequence

Mitigation

Preferred allocation

Site risks

Existing structure (refurbishment/ extensions)

The risk that existing structures are inadequate to support new improvements.

Additional construction time and cost.

The private party will be able to manage this risk by commissioning expert engineering reports which can be used to assess and cost the management of this risk in its bid.

Private party.

Site conditions

The risk that unanticipated adverse ground conditions are discovered which cause construction costs to increase and/or cause construction delays.

Additional construction time and cost.

The private party can mitigate and manage this risk through site inspections, testing and due diligence.

Generally this risk will be allocated to the private party. However in certain circumstances it maybe appropriate for government to accept some site risk.

Approvals

The risk that necessary approvals may not be obtained or may be obtained only subject to unanticipated conditions which have adverse cost consequences or cause prolonged delay.

Delay in works commencement or completion and cost increases.

Mitigation will be contingent on planning approval processes and legislation planning approval risk.

The private party, unless government assumes this risk.

Environmental (1)

The risk that the project site is contaminated requiring significant expense to remediate.

Clean-up costs and delay (recognising that the ultimate responsibility for clean-up remains with the polluter, if available).

The private party can mitigate this risk by commissioning expert reports and possibly through insurance.

Generally this risk will be allocated to the private party. However, in certain circumstances it maybe appropriate for government to accept some contamination risk; for example, if there is significant risk of unidentified contamination or uncertainty as to the overall extent of the possible problem.

Environmental (2)

The risk that prior to financial close offsite pollution has been caused from a government preferred site to adjacent land.

Clean-up liability (recognising that the ultimate responsibility for clean-up remains with the polluter, if available).

Government can mitigate this risk by commissioning contamination reports, given that government should also have greatest knowledge of the past uses of its site.

Government may assume responsibility by way of indemnity or obligation to compensate for unidentified off-site pollution pre-financial close where the site is a government site.

Environmental (3)

The risk that prior to financial close (in the case of a non-government site) or after financial close (for either a non-government or government site) off-site pollution is caused to adjacent land.

Clean up liability (recognising that the ultimate responsibility for clean-up remains with the polluter, if available).

The private party can manage this risk by controlling activities on the site after financial close.

The private party.

Clean-up and rehabilitation

The risk that the use of the project site over the contract term has resulted in a significant clean-up or rehabilitation obligation to make the site fit for future anticipated use.

Financial liability on residual owner (recognising that the ultimate responsibility for clean-up remains with the polluter, if available).

The private party can mitigate and manage this risk by managing the use of the asset.

Government may require sinking funds if it is to resume the site and its use is liable to result in significant clean-up / rehabilitation cost.

Generally this risk will be allocated to the private party (whether government is to resume possession of the site or not), except to the extent that government has accepted contamination risk.

Native title

The risk of costs, delays and compensation or risk of injunction and/or invalidity of approvals.

Delay, cost and compensation.

Government can mitigate and manage this risk by searching relevant registers, making enquiries if appropriate and where required, obtaining expert advice.

There are also a number of mechanisms available under the Native Title Act 1993 (Commonwealth).

Government will usually accept this risk on government-preferred sites.

Cultural heritage

The risk of costs and delays associated with archaeological and cultural heritage discoveries.

Delay and cost.

This risk can be managed and mitigated by searching relevant registers, making enquiries if appropriate and, where required, obtaining expert advice.

Government will usually accept this risk on government-preferred site. Where the private party chooses the site, this risk will be allocated to the private party.

Availability of site

The risk that tenure/access to a selected site that is not presently owned by government or the private party cannot be negotiated.

Delay and cost.

This can be mitigated by requiring bidders to secure access to the site prior to contract signing.

The private party, as it makes the decision to bid on a non-preferred site.