When undertaking a P3 project it is critical to understand all factors or events that may jeopardize the proponents' ability to achieve the anticipated benefits of the project, or that may increase the cost of the project. These factors or events are project risks. It is essential to assess the probability and impact of each category of risk, and to determine how each risk will be mitigated or managed. The private sector should be consulted to properly identify and allocate risk.
There are many ways of categorizing risk but the purpose is to clearly define risks and select appropriate risks to transfer to the private sector. These are the risks that the private sector can price, mitigate and/or insure. The government should retain those risks that it can manage more effectively than the private sector. Risks that are outside the control of either party should be shared.
The inappropriate transfer of risk to the private sector will impact the value for money offered by a P3. Transferring risk that the private sector should not carry will result in cost premiums; retaining risks with the government that should be transferred or shared will reduce private sector incentive.
The business case template (Appendix B) includes a table of typical risks for a Government of Alberta P3 project but must not be relied upon as a substitute for proper analysis. The identification, allocation and management of risk will ultimately be considered project by project.