Risks

The nature of the contract management risks to be managed through the lifecycle of a Partnerships Victoria project is discussed in detail in Chapter 2. Effective contract management requires an understanding of all the material risks, analysis of their changing impact on the project and the formulation of dynamic contract management strategies.  From a performance monitoring perspective, it is most useful to distinguish between risks that are borne by the government party and risks that have been transferred to the private party. As discussed in Section 2.2, the risks borne by the government party include:

•  risks contractually allocated to the government party;

•  the residual risk to government of risks transferred to the private party;

•  risks arising from issues not resolved at commercial acceptance;

•  the risk of private party failure; and

•  the risk of ineffective public sector management.

Effective contract management requires an understanding of the project risks that have been transferred to the private party. Understanding these risks is essential to understanding the private party's business.