Performance/price risk

Solid waste collection, disposal, landfill and recycling Solid waste collection, disposal, landfill and recycling

Description (What is the Risk)

The risk that the asset is able to achieve the output specification metrics and the price or cost of doing so.
Damage Pollution Accidents.
Meeting handback requirements
Health and Safety
Equipment becoming prematurely obsolete.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared

The Private Partner bears the risk of meeting the performance specification.

However, the Contracting Authority is responsible for enforcing the regime and for ensuring that the output specifications are properly tailored to what the Private Partner can deliver. Consideration needs to be given to the ability of the Private Partner to achieve the necessary performance levels, and the appropriateness of metrics given the nature of the project.

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

The onus falls upon the Contracting Authority to draft attainable standards based on relevant market data and policy objectives. Performance based on increased recycling, landfill reduction, availability, and quality of service can be measured against pre-determined schedules or standards.

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

Where certain performance indicators cannot be met due to actions by the Contracting Authority or unforeseen circumstances, the Private Partner may be eligible to seek relief or compensation.

Comparison with Emerging Market

In developed markets, the Contracting Authority should have access to various data sources to develop realistic and attainable performance specifications and models.

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