Design risk

Airport Airport

Description (What is the Risk)

The risk that the project has not been designed adequately for the purpose required.
Approval of detailed designs.
Changes to design.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

Because an airport is either a national or local matter of pride and importance the Contracting Authority may have hired a leading firm of architects to design the airport and to provide the outline specification. In these circumstances the Private Partner will be required to adopt the outline design and to provide detailed design that fits in with this, whilst still ensuring that the airport will comply with the output specifications set by the Contracting Authority.

The Contracting Authority may retain some design risk in certain aspects of the system or related works, depending on how prescriptive the Contracting Authority is in the output specification.

If the output specification is too prescriptive (e.g. the terminal design constrains the efficiency of the design or the throughput of passengers) the Private Partner's ability to warrant the fitness for purpose of its design solution may be impacted, and the Contracting Authority will to that extent share in the design risk.

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

A detailed design review process will allow for increased dialogue and cooperation between the Contracting Authority and the Private Partner; however the mutual review process should not be construed as a reduction or limitation of the Private Partner's overall liability.

The detailed design review process should not be too prescriptive because if it is then the benefits of providing for private sector innovation and efficiency gains in the design will be diminished.

In addition, if the detailed design review and approval process is too lengthy it can lead to delays in construction which may ultimately impact upon the achievement of milestones by targeted dates. This can also be the case if the Contracting Authority seeks to amend the outline specifications (or previously approved detailed design) which can lead to both delays and additional cost of the necessary changes to detailed design.

Comparison with Emerging Market

Developed market airport projects benefit from stable resource availability and defined design standards which allow for increased innovation and productivity gains. The quality of the information provided by the Contracting Authority and limited ability to verify such data can also hinder the Private Partner's ability to unconditionally take full design risk.

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Description (What is the Risk)

The risk that the project has not been designed adequately for the purpose required.
Approval of detailed designs.
Changes to design.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Private Partner will have principal responsibility for adequacy of the design of the system and its compliance with the output / performance specification.

The Contracting Authority may retain some design risk in certain aspects of the system or related works, depending on how prescriptive the Contracting Authority is in the output specification.

If the output specification is too prescriptive (e.g. the terminal design constrains the efficiency of the design or the throughput of passengers) the Private Partner's ability to warrant the fitness for purpose of its design solution may be impacted, and the Contracting Authority will to that extent share in the design risk.

Delay in approving designs would typically be a Contracting Authority risk.

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

The Contracting Authority may wish to consider how prescriptive it should be in the output specification. It may wish to request a degree of cooperation and feedback during the bidding phase to ensure that the bidding consortia's expectations in terms of an appropriate risk allocation for design responsibility are taken into account when finalising the output specification.

The detailed design review process should not be too prescriptive because if it is then the benefits of providing for private sector innovation and efficiency gains in the design will be diminished.

In addition, if the detailed design review and approval process is too lengthy it can lead to delays in construction which may ultimately impact upon the achievement of milestones by targeted dates. This can also be the case if the Contracting Authority seeks to amend the outline specifications (or previously approved detailed design) which can lead to both delays and additional cost of the necessary changes to detailed design.

Back to Airport