Disruptive technology risk

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Description (What is the Risk)

The risk that a new emerging technology unexpectedly displaces an established technology.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The technology requirements will usually be specified by the Contracting Authority in the bid phase and agreed with Private Partner in the agreements.

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

The Contracting Authority should do a full assessment of relevant technologies as part of the project feasibility study to ensure that the selected technologies are appropriate to the conditions of the project and market tested.

The Contracting Authority may impose an obligation on Private Partner to seek continuous improvement in specified areas, for example in monitoring and metering.

The Private Partner may be obliged to operate in accordance with best industry practice which may also impose some obligation on the Private partner to take on improvements in technology.

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

The concession agreement may contain a variation clause to provide for both parties to propose variations to the minimum functional specification, in particular where this may deliver public health and water efficiency benefits.

Comparison with Emerging Market

In developed markets, this has not been typically addressed but is expected to increase with technological advances, for example smart metering.

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Description (What is the Risk)

The risk that a new emerging technology unexpectedly displaces an established technology.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The technology requirements will usually be specified by the Contracting Authority in the bid phase and agreed with Private Partner in the agreements.

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

The Contracting Authority should do a full assessment of relevant technologies as part of the project feasibility study to ensure that the selected technologies are appropriate to the conditions of the project and market tested. The Private Partner may be obliged to operate in accordance with best industry practice which may also impose some obligation on the Private partner to take on improvements in technology.

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

The concession agreement may contain a variation clause to provide for both parties to propose variations to the minimum functional specification, in particular where this may deliver public health and water efficiency benefits.

Comparison with Developed Market

In emerging markets, this risk is not typically addressed in the project documents. As project implementation and execution are often delayed in emerging markets, the risk of technology change could be considered higher than in developed markets.

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