Design risk

Power transmission Power transmission

Description (What is the Risk)

The risk that the project has not been designed adequately for the purpose required.
Feasibility study.
Approval of 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 functional and performance specifications.

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 functional specification.

If the functional specification is too prescriptive (e.g. the required route corridor or specified conductor or tower type constrains the efficiency of the design) 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.

If the project is being integrated into an existing interconnected electricity transmission system, the Private Partner's ability to warrant the fitness for purpose of its design solution may be impacted (in that it will not be able to warrant defects in the existing interconnected electricity transmission system that may impact performance).

A feasibility study is relevant for most projects. Such studies provide the design / cost analysis to determine the viability of the project.

Delay in approving designs Contracting Authority risk.

Changes to design depend on reason for change - if the original design is deficient this will be a Private Partner risk or if the change is required by Contracting Authority this may be a Contracting Authority risk.

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

The Contracting Authority will often broadly draft the Private Partner's design and construction obligations to satisfy the functional specifications and ensure compliance with applicable legal requirements and good industry practice standards. This allows for private sector innovation and efficiency gains in the design.

A 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.

Comparison with Developed Market

Developed market transmission projects benefit from 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.
Feasibility study.
Approval of 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 functional and performance specifications.

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 functional specification.

If the functional specification is too prescriptive (e.g. the required route corridor or specified conductor or tower type constrains the efficiency of the design) 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.

If the project is being integrated into an existing interconnected electricity transmission system, the Private Partner's ability to warrant the fitness for purpose of its design solution may be impacted (in that it will not be able to warrant defects in the existing interconnected electricity transmission system that may impact performance).

A feasibility study is relevant for most projects. Such studies provide the design / cost analysis to determine the viability of the project.

Delay in approving designs is a Contracting Authority risk.

Changes to design depend on reason for change - if the original design is deficient this will be a Private Partner risk or if the change is required by Contracting Authority this may be a Contracting Authority risk.

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

The Contracting Authority will often broadly draft the Private Partner's design and construction obligations to satisfy the functional specifications and ensure compliance with applicable legal requirements and good industry practice standards. This allows for private sector innovation and efficiency gains in the design.

A 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.

Back to Power transmission