Design risk

Water Distribution Water Distribution

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 the adequacy of the design of the rehabilitation works and its compliance with the functional / performance specification provided by the Contracting Authority.

The Contracting Authority will retain the design risk to the extent that the design is dependent on interconnections for which the Contracting Authority retains responsibility, such as the raw water supply connection points and raw water quantity and quality, and for the condition of the existing assets as at the commencement of the term.

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

The Contracting Authority will generally provide minimum functional / performance specifications and require compliance with applicable legal requirements and good industry practice standards. This allows for private sector innovation and efficiency gains in the detailed design.

The Contracting Authority should take time to ensure that the minimum functional / performance specifications will provide a facility that will meet the Contracting Authority's expectations on transfer of the facility to the Contracting Authority at the end of the term.

A design review process will allow for the Contracting Authority to review and comment on the Private Partner's detailed design; however, the review process should not be construed as a reduction or limitation of the Private Partner's overall liability (for example, by way of approval by the Contracting Authority) or its general freedom provided that the minimum functional / performance specifications are met.

Government Support Arrangements (What other government measures may be needed to be taken)

The Contracting Authority's role will be limited to review of the design to ensure that the minimum functional / performance specifications will be able to be met. This review will not be an approval, however, and will not limit the liability of the Private Partner.

Comparison with Emerging Market

Developed market water distribution projects benefit from stable resource availability, robust regulatory regimes and defined design standards which allow for increased innovation and efficiency gains.

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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 the adequacy of the design of the rehabilitation works and its compliance with the functional / performance specification provided by the Contracting Authority.

The Contracting Authority will retain the design risk to the extent that the design is dependent on interconnections for which the Contracting Authority retains responsibility, such as the raw water supply connection points and raw water quantity and quality, and for the condition of the existing assets as at the commencement of the term.

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

The Contracting Authority will generally provide minimum functional / performance specifications and require compliance with applicable legal requirements and good industry practice standards. This allows for private sector innovation and efficiency gains in the detailed design.

The Contracting Authority should take time to ensure that the minimum functional / performance specifications will provide a facility that will meet the Contracting Authority's expectations on transfer of the facility to the Contracting Authority at the end of the term.

A design review process will allow for the Contracting Authority to review and comment on the Private Partner's detailed design; however, the review process should not be construed as a reduction or limitation of the Private Partner's overall liability (for example, by way of approval by the Contracting Authority) or its general freedom provided that the minimum functional / performance specifications are met.

Government Support Arrangements (What other government measures may be needed to be taken)

The Contracting Authority's role will be limited to review of the design to ensure that the minimum functional / performance specifications will be able to be met. This review will not be an approval, however, and will not limit the liability of the Private Partner.

Comparison with Developed Market

Developed market distribution projects will generally have well defined design standards. However, particularly on a rehabilitation project, the quality of information provided by the Contracting Authority and limited ability to verify that data may hinder the Private Partner's ability to assume this risk unconditionally.

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