Construction risk is the risk of unforeseen cost increases in the construction of the infrastructure facility. Normally the contractor bears this risk, but where increased costs or delays are anticipated to be caused by the LGU, then it is appropriate for LGU to bear this risk, as the risk is under its control.
The LGU could cause an increase in construction cost perhaps when it wants to reserve the right to enhance the design requirement during the construction period through the mechanism of a reopener. The compensation for that cost increase could take the form of a cash payment, or the operator may be given permission to recover the increase over time through increased tariffs. If a tariff cap is in place, increased tariff subsidies would apply.