Construction risk

Solid waste collection, disposal, landfill and recycling Solid waste collection, disposal, landfill and recycling

Description (What is the Risk)

Quality assurance standards.
Defective material.
Latent defects.
Interface/project management.
Cost overruns where no compensation /relief event applies.
Commissioning damage.
IP right breach/infringement.
Labour disputes.
Subcontractor disputes/insolvency.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

Private Partner assumes turnkey construction and project management risk. Private Partner is responsible for integrating various aspects of construction such as engineering, civil construction works and technology integration in the waste treatment facility.

Private Partner required to construct to specific industry standards to ensure fitness for purpose of the waste treatment facility and to meet certain defined performance guarantees. The facility may be rejected if performance levels are significantly below the contractual requirement and termination payments will become due from the Private Partner.

Private Partner takes risk of cost overrun where no compensation/relief event applies. Private Partner will takes the risk on delay damages for programme overruns.

Private Partner takes labour dispute risk unless political.

Private Partner takes risk of IP right infringement.

Mitigation Measures (What can be done to minimize the risk)

Private Partner will attempt to address by passing through obligations to the construction contractor.

The construction contractor will be liable for performance damages in relation to underperformance of the completed facility and the facility may be rejected if performance levels are significantly below the contractual requirement.

Construction contractor will pay delay damages for programme overruns.

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