If the state terminates an agreement with a consortium, then presumably, it is left without what it set out to achieve (RK06). However, despite obvious risks of contract termination e.g. take-back of assets or services, or negotiating with another party to provide the services possibly at a higher cost to government or delivered to a lower standard (RK05), termination events may not always result in poor VfM outcomes (RK11, RK05, PT11 and PF14), if the asset can be secured at a discounted price by the state (PT11). A favourable outcome may, however, depend on a range of factors specific to each PPP including the cost of financial settlement (RK11) (including making an adjustment to employment conditions of staff under new pay awards, if applicable (PT11)) and the amount of value left in the life of the contract (RK05). PT11 offers further insights:
"If they go bust, then government should get the facility back a few years earlier than it would have otherwise done without payment, in theory...They don't default normally if the contract has value. If the contract is worth money then the banks and others, the sponsors, will try to recoup the value in the contract by replacing the operator".
Taking a broader view of VfM for the state, RK05 comments:
"If you terminate the contract..., you may still have got a VfM outcome because you may have a fantastic piece of infrastructure, it may be better than what government would have built if it had not been a PPP, or you may have had lower costs".