Risk Category

Description

Consequence

Mitigation

Preferred allocation

Design, construction and commissioning risk

Design

The risk that the design of the facility is incapable of delivering the services at anticipated cost.

Long-term increase in recurrent costs -possible long-term inadequacy of service.

The private party can manage this risk by trying to pass the risk to its builder/architects and other subcontractors, although it will continue to remain primarily liable under the contract with government.

The private party will be responsible except where an express government mandated change has caused the design defect.

Construction

The risk that events occur during construction which prevent the facility being delivered on time and on cost.

Delay and cost.

The private party will generally manage this risk by entering into a fixed-term, fixed-price building contract to pass the risk to a builder with the experience and resources necessary to satisfy the private party's construction obligations under the contract.

The private party will be liable unless the event is one for which relief as to time or cost or both is specifically granted under the contract.

Commissioning

The risk that either the physical or operational commissioning tests which must be completed for the provision of services to commence, cannot be successfully completed.

For the private party and its financiers -delayed/ lost revenue; for government - delayed service commencement.

The private party will manage this risk by using an expert design, construction, operations and project management team.

The private party, although government will assume an obligation to cooperate and facilitate prompt public sector attendance on commissioning tests. The private party will not be able to earn revenues until the facility is commissioned.