Project Structuring & Risk Allocation Flashcards
7 cards from real CP3P practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Project Structuring & Risk Allocation flashcards as text
The authority provides the site for a PPP but supplies only limited survey data. Who typically bears the risk of unknown pre-existing contamination?
Answer: The public authority, fully or on a shared basis
When the authority controls the site and the information about it, it usually keeps or shares the risk of latent pre-existing contamination, because the bidders cannot price it efficiently.
Which type of change in law is the public authority usually responsible for in a PPP?
Answer: Discriminatory changes that target the project or PPP sector specifically
The private partner usually bears general changes in law, while the authority compensates for discriminatory or project-specific changes.
What is a key risk-management benefit of bundling design, build, finance, and operations into one DBFO contract?
Answer: It removes interface risk between the designer, builder, and operator by making one party responsible
Single-point responsibility reduces interface risk and gives the private partner a reason to design for lower whole-life costs.
In many PPP frameworks, how are refinancing gains usually treated?
Answer: They are shared between the authority and the private partner, often around 50:50
Refinancing gain-sharing clauses usually give the authority a share, often about 50%, of gains from refinancing on better terms.
On termination for authority default, what compensation does the private partner typically receive?
Answer: Senior debt, equity (including a return), and breakage costs
The authority caused the termination, so the private partner is typically made whole: senior debt, equity with an expected return, and breakage costs.
On termination for private partner default, what usually happens to the sponsors' equity?
Answer: It is largely or entirely lost, and compensation is based on market value or a share of debt
After contractor-default termination, compensation is usually limited to market value or a percentage of debt, so equity sits at risk to keep sponsors motivated to perform.
Why does a Public Sector Comparator include a risk adjustment?
Answer: To reflect the cost of risks the public sector would keep under traditional procurement
The risk adjustment prices the risks the government would bear under conventional delivery, so the comparison with PPP bids is like-for-like for value for money.