It is more common for either the construction or the operations contractor to become insolvent during the relevant phase of a PPP project than for the Project Company itself to become insolvent. While the insolvency of a key contractor is primarily a Project Company risk, the Procuring Authority still needs to monitor the situation both during the lead up to and following the insolvency, because of the increased risk to the project. Termination of a key contractor is detailed in Chapter 7 (Default and termination).
The Project Company typically manages the risk of contractor insolvency by seeking to recover the replacements costs from the insolvent contractor's security package (e.g. performance bonds and parent company guarantees). The security package is designed to cover the cost of replacing the insolvent contractor, including any premium the new contractor will charge to take on partially completed works.