Risk allocation Under PF2, changes will be made to the risk allocation to improve value for money through the greater retention and management of certain risks by the public sector. In PF2: • the risk of additional capital expenditure arising from an unforeseeable general change in law will be taken by the public sector; • utilities consumption risk will be taken by the public sector subject to a two year handover test; • the risk of the site being contaminated by offsite sources will be taken by the public sector where it has provided the site; • procuring authorities will be required to undertake adequate investigations into legal title for sites made available to bidders and provide a warranty to the contractor; and • where the authority provides the site for the project, the authority will also be required to procure ground condition surveys and make them available to all bidders with the benefit of a warranty. Insurance To improve the value for money of insurance: • the Government will amend the current provisions dealing with sharing the premium risk of core required insurances in the operational phase of projects, so as to allow the authority to take a bigger share and reduce the contractor's need to build up reserves against market movements; and • the Government will explore moving to a model whereby the procuring authority will retain the risk of material damage and business interruption of facilities in their operational phase (rather than insuring in the market) for PF2 projects/programmes which have a dispersed asset base and predictable claims history. |