Assessing Allocation
Factor | Risk Allocation |
Project Company responsible for meeting performance requirements at all times. | More likely to be Project Company risk |
Failure of a sub contractor or supplier is not mitigated through the Project Agreement, e.g. there is no right to an extension of the sunset date, or long-stop date, or an increase in price. | More likely to be Project Company risk |
No relief, or only temporary/restricted relief from abatement when replacing a contractor. | More likely to be Project Company risk |
Where a contractor becomes insolvent and the contract reverts to the government, the government will become responsible for the delivery of the project services. However, the termination regime in most PPP contracts provides a mechanism for the government to ensure that it is able to rectify any service short-falls and the termination sum is based on government delivering the service to the required specification. If a key supplier has become insolvent and the cost of a replacement is more expensive, this additional amount would normally be taken into account in determining the compensation due. | More likely to be Project Company risk though a residual element is likely to remain with the government |