Design risk

Water Desalination Water Desalination

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 facility 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 required output flow and pressure for the water delivery pipe.

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 project.

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 or its general freedom provided that the minimum functional / performance specifications are met.

Comparison with Emerging Market

Developed market water desalination projects benefit from stable resource availability 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 facility 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 required output flow and pressure for the water delivery pipe.

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

The Contracting Authority will require compliance with applicable legal requirements and good industry practice standards.

The Contracting Authority will also provide functional / performance specifications, which can often be more prescriptive than the Private Partner may anticipate. The Contracting Partner will often prevent supplies being sourced from certain jurisdictions.

The Contracting Authority should take time to ensure that the 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 project.

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 or its general freedom provided that the minimum functional / performance specifications are met.

Comparison with Developed Market

In emerging markets, the functional / performance specifications provided by the Contracting Authority (as well as design oversight) can often stifle private sector innovation and efficiency gains in the detailed design.

Emerging market water desalination projects may be particularly dependent on power availability, which has implications for the Private Partner's ability to meet the Contracting Authority's anticipated availability and output requirements in order to meet its water supply obligations.

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