Disruptive technology risk

Water Desalination Water Desalination

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 will usually be specified by the Contracting Authority in the minimum functional specification.

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 will often be encouraged to identify any issues with the selected technology during the bid phase and to submit an alternative bid based on alternative technology.

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

The concession contract will usually contain a variation clause (if permitted by local law) which would provide for both Contracting Authority and Private Partner-proposed variations to the minimum functional specification.

Comparison with Emerging Market

As these types of projects utilise very specialised technology, requirements for the Private Partner to take on obligations to take advantage of, or use, new technology are unlikely.

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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 will usually be specified by the Contracting Authority in the minimum functional specification.

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 will often be encouraged to identify any issues with the selected technology during the bid phase and to submit an alternative bid based on alternative technology.

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

The concession contract will usually contain a variation clause (if permitted by local law) which would provide for both Contracting Authority and Private Partner-proposed variations to the minimum functional specification.

Comparison with Developed Market

In emerging markets, this risk is not typically addressed in the project documents. Contracting Authorities often seek alternative bids in order to consider alternative technology proposals. 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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