H.2 What risks must be identified and managed?
There are a number of sources of contract risk to government that may compromise or otherwise impact on the value for money outcomes of a PPP project.
Figure H‑1: Categories of contract risk in a PPP project
The range of risks that must be considered for contract management purposes (contract risks) is broader than the range of risks considered by the procurement team for contractual risk allocation purposes (project risks).
To identify and manage this range of contract risks, a contract management strategy should incorporate thorough information collection, analysis and management practices, and an ongoing review process. New and emerging risks through the project lifecycle must be identified and control action taken. Failure to develop and implement an effective contract management strategy for the project is, in itself, a risk that must be managed.
| Risks that must be identified and managed ('contract risks') in a PPP project are all risks that may compromise project objectives and value for money, including risks allocated to government, residual risk to government of risks allocated to the private party (for example, the residual risk to government of ineffective private party performance) and risks arising through ineffective public sector performance. Risks not identified cannot be proactively managed and can be very damaging. Risks cannot be correctly identified unless there are clear project objectives that provide an unambiguous description of success for the project. |