6.6  Risk analysis for contract administration

In order to administer the project deed, the contract director needs to identify the potential risks, and to assess the likelihood of each material risk eventuating and the magnitude of possible consequences. The relationship between service delivery, risk and contract management generally, and the categories of risks relevant in the Partnerships Victoria contract management context, are discussed in Chapter 2 of this guide.

During the procurement phase, a risk analysis is carried out to determine how project risks should be allocated under the project deed and other project contracts. In preparing the contract administration manual, the government party, contract director and contract management team will need to further develop this risk analysis to:

•  identify the project risk allocation under the project deed and other project documentation;

•  identify pre-existing or new risks that may not have been considered or dealt with in the contractual risk allocation process and incorporate in the existing risk analysis; 

•  assess the likelihood of the risk occurring and the magnitude of the consequences, to the extent that these issues have not been addressed previously;

•  develop risk and contingency management processes and tools as listed in Appendix G for the most critical risks (see Chapter 8 of this guide for details on developing a contingency framework); and

•  determine whether the fact that a risk event occurs should trigger a review of the contract administration manual.

Contract risk analysis should be undertaken regularly, at least annually during both the construction phase and service delivery phase, and risk registers and/or issues logs should be updated accordingly.