The PPP risk management issues discussed in this section can be summarised as follows:
- Operational innovation. This research assumes that the most significant opportunities for identifying opportunity risks (as distinct from threat risks) are negotiated and built into PPP agreements and with anticipated corresponding cost savings / economies of scale, this will be a legitimate reason for awarding a contract to a particular bidder. However, it is not readily known how much scope there is for opportunity risk identification and exploitation during operations due to a lack of publically available information on this subject. This may be due to a perception that risk management is a 'protective', rather than 'exploitative' technique, and is evidenced by the prevailing threat perspective adopted in the majority of the risk management literature.
- Contract variation. Amendments to concession deeds can result from technical obsolescence, new legal / political requirements, changes in service user demand, service provider under-performance and from decisions to modify the length of agreements. The public partner retains a right to intervene if the quality of services provided by the private partner fails to meet its obligations. This could arise from a breach of contract such as default or due to an emergency situation where circumstances may be beyond the capability of the private partner to deal with the situation effectively.
- Change of consortium members. Sub-standard delivery of services or the failure to provide agreed services by a member of a private consortium may lead to its contract being terminated. Such situations, for example, may lead to the replacement of that member within the existing consortium or an amended contract if the provision of those services is no longer required.
- Contract termination. A key objective of contract management is to ensure that private partner obligations are met for the full contract period. Although considered as a last resort, contract termination can be enforced if the service provider fails to meet its contractual responsibilities or is placed into receivership. As the public partner is fully accountable for the continued delivery of services under these circumstances, it can attempt to mitigate this risk by putting contingency plans in place.
- End of concession hand-over. If assets are not properly managed or physically maintained, they can deteriorate prematurely and be rendered 'unfit for purpose'. This can reduce VfM outcomes particularly if the public partner then has to absorb the cost of major repairs or replacements after hand-over (expiry of concession) is complete. The public partner can mitigate this type of risk by writing stipulations into concession agreements stating that assets must be appropriately maintained over the full life of the contract term. If irregularities are uncovered, the public partner can penalise and / or abate the private partner operator to cover its costs. An associated issue here is the practicability of determining in advance what the hand-back condition of an asset should be, and what penalties for non-compliance would be appropriate, for an event that might lie decades into the future.
- Skills transfer. Government looks to the private partner for knowledge and skills that lead to service innovation and technical know-how. The failure to transfer skills from the private partner to the public partner can result in the payment of expensive fees to external advisers for longer than necessary and prevent the broadening of public sector knowledge that will typically drive down costs and increase skill levels over the long-term - benefits that could be applied to other PPPs.
- Reputation damage. Unanticipated events during PPP operations can have unexpected consequences for the public partner. Even though its private partner is responsible for service delivery, there is potential for negative media attention to be misdirected to government when things go wrong. The public partner may need to take proactive action in order to protect its reputation through awareness-raising initiatives or other means of direct action. Governments' reputation can also be damaged if governance, probity and compliance frameworks are not properly adhered to by their employees.