International Construction Law Review
PFI/PPP PROJECT AGREEMENTS—RISK ALLOCATION ISSUES TO CONSIDER IN FLOW-DOWN OF RISKS
ANDREW CHEW
Special Counsel, Mallesons Stephen Jaques, Sydney, Australia
GEOFF WOOD
Partner, Mallesons Stephen Jaques
AND
DAVID STORR
Partner, Mallesons Stephen Jaques
1. INTRODUCTION
In Australia, over the last 10 years, there has been a marked increase in co-operation between governments and private sector for the development, financing and operation of an array of infrastructure ranging from tollroads, water and sewerage treatment plants, sewerage outfall tunnels, power stations, hospitals, schools and prisons to defence-related equipment. These Public-Private Partnership (PPP) projects are being primarily driven by governments wanting to implement projects without recourse to public funding, and to improve the quality and efficiency of delivering these infrastructure facilities and on-going services to the public.
In Australia, PPP projects to date have been largely based on the Build-Operate-Transfer (BOT) model and project financed by the private sector. They are also commonly referred to as private financing initiatives or (due to the enduring Australian obsession with the three letter acronym) PFIs, PPPs or PFPs.
This paper will focus on how concession companies are managing project risks “downstream” with their construction and operator subcontractors.
2. KEY PRINCIPLES OF PROJECT FINANCED PPP PROJECTS
A PFI/PPP deal generally involves:
- (a) a concession agreement between the government and the private concessionaire, with the concessionaire (usually a special purpose vehicle (SPV) formed solely for that purpose by the sponsors and
[2005The International Construction Law Review92