F19 For those contracts that fall directly within the FRS, whether a party has an asset of the property will depend on whether it has access to the benefits of the property and exposure to the associated risks. This will be reflected in the extent to which each party bears the potential variations in property profits (or losses). The principle here is to distinguish potential variations in costs and revenues that flow from features of the property - which are relevant to determining who has an asset of the property (see paragraphs F22-F50) from those that do not - and which are therefore not relevant to determining who has an asset of the property (see paragraph F20).
F20 There may be features that could lead directly to profit variations for reasons that relate purely to a service. Such variations may take the form of potential penalties for under-performance, or potential variations in revenues or in operating costs. These should be ignored when assessing who has an asset of the property, irrespective of their size. For example, a penalty may arise in a PFI contract for a prison because the security staff have not been trained satisfactorily, or in a PFI contract involving a catering facility because the food purchased is not up to standard. Similarly, potential variations in operating costs may relate purely to a service, for example the cost of raw materials and consumables in a catering facility. Such potential variations are irrelevant to determining which party has an asset of the property.
F21 There may be a significant number of property factors (for example, those listed in paragraph F22). It will be important to assess the effect of all relevant factors and the interaction between them, giving greater weight to those that are more likely to have a commercial effect in practice. It will not be appropriate to focus on one feature in isolation. It will be necessary to consider both the probability of any future profit variation arising from a property factor and its likely financial effect. Additional costs may be incurred to correct a problem rather than risking the imposition of a much greater penalty, in which case the relevant variation to consider is the likely increase in costs rather than the possible penalty. Similarly, a possible increase in future costs may be avoided by altering some feature of the property at a lower net cost, in which case the variation to consider is the cost of altering the property.