Changes in ownership can result in the departure of an investor with strong knowledge and capability related to the project, and their replacement by an investor with less knowledge and capability. For example, a common change in ownership is the sale by an initial project sponsor of its interest in the project to a long-term 'passive' investor once the project has reached a state of steady operations. The contract director should carefully consider whether the private party will continue to have access to the necessary resources and expertise to satisfactorily perform its obligations.
Where an initial active investor is replaced by a long-term passive investor, particular attention should be paid to the proposed arrangements for operating and managing the private party. In a Partnerships Victoria project, the subcontractors are engaged by the private party, not by the government party. The government party relies on private party employees and representatives of the investors (behind the private party) to manage the private party's subcontracts. When a change in ownership or control is proposed, the State must assure itself that appropriate arrangements will be in place to give the private party access to the strategic, technical, commercial and legal capacity required to perform its obligations under the project deed and manage the subcontracts appropriately. It may be appropriate to seek formal commitments from the private party or its investors in relation to the ongoing availability of this capacity.
Ability and capacity concerns can also arise in relation to changes of ownership of key subcontractors. Within the framework of the change in control or ownership consent requirements, the contract director should carefully consider whether the subcontractor will continue to have access to the necessary resources and expertise to satisfactorily perform its role on an ongoing basis, taking into account the range of risks and circumstances that may arise.