9. In a PFI the public sector does not seek to transfer risks to the private sector as an end in itself. The key principle is that the many different risks inherent in a major investment programme and on-going service are borne by the party best placed to manage those risks. Where risks are transferred, it is to create the correct disciplines on the private sector, which then drive VfM through more effective risk management.
10. HMT has produced guidance, in the form of the Standardisation of PFI Contracts (SoPC), to promote a common understanding of the main risks that are encountered in a PFI project. In 2006, taking account of SoPC guidance, MOD produced a standard form of MOD PFI contract - MOD PFI PAv1. This covers the 60-70% of any project agreement that should be common to all MOD PFI projects and, by mandating its use for future MOD PFI deals, ensures that a common balance of risk for these areas is achieved across those MOD PFI contracts. The remaining 30-40%, which needs to be developed on a project by project basis, includes:
• specification (in the form of the Asset Provision Requirements, Service Provision Requirements and Services Availability Requirements), Contractor's Asset Provision and Service Provision Proposals and programmes;
• payment and incentive mechanics and performance monitoring regimes;
• provisions to cover specific land issues, and, if relevant, development of any property leases;
• completion of the blank Schedules,
as well as any other area that is genuinely peculiar to a specific project or group of projects. Completing these areas of the project agreement should not extend to project teams seeking to change the risk balance in the contract, unless derogation is requested on project-specific grounds from HMT/PUK through the MOD PFU.