Industry is gravely concerned at government's attempts to transfer risks which it is not able to manage - the NAO has acknowledged this as an issue, but it has not yet been recognised as a whole-of-government problem. Risk transfer was mentioned more often than anything else by survey participants as they sought to describe the current state of the market. Again, this is not a recent problem, but it has become much worse in recent years.
Contrary to the longstanding policy of government, recently restated in the 'Government Commercial Operating Standards', that 'risks are allocated to the parties best placed to manage risk', the experience of recent years has been that procurement teams are aggressively seeking to maximise risk transfer.
Several of the larger providers said that this was a significant reason why they were now qualifying out of more procurements. One chief executive said that they had withdrawn from an entire market sector because of a shift to unlimited liability.
The kinds of risk which companies are expected to bear are varied - policy risk, state-aid risk, unlimited liability, excessive performance bonds, break clauses without costs, responsibility for ensuring cooperation with other government agencies, long-term capital risk in short-term contracts, and the risks associated with an incomplete understanding by the customer of the nature of their services.
Why have companies assumed these risks? The best explanation seems to be the shift within government from a relational to a transactional approach to contracting - based on years of previous experience, company executives did not believe that government would interpret such clauses strictly.