There are a number of areas of risk transfer to the private sector which may no longer represent value for money and which may have been included, or retained following changed circumstances in the original contracts principally in order to achieve off balance sheet treatment. These tend to be in areas where the contractor is not in control of the risk and is therefore likely to charge a premium. With the recent change in accounting treatment, this higher level of risk transfer is not required to retain off balance sheet treatment.
The main areas to review in this area are:
• Movements in the general insurance market for insurance premia
• General change in law affecting the costs of the PPP company
There may be an opportunity to re-negotiate this risk transfer on some existing projects in order to achieve a reduction in the unitary charge; albeit with some greater level of risk being taken by the public sector. It will be dependent upon the allowance for risk that has been made within the pricing of each contracts and how any unitary charge savings that result compare with the additional risks being assumed.