Professional Documents
Culture Documents
• Nolan Heuchert
– Wylie-Crump Limited
P3 Construction Projects
• Past 10 years – over $26 billion in
infrastructure under P3 model in Canada
• Current public infrastructure “deficit” (gap
between needs and current funding
commitments) estimated at more than
$200 billion
• Expect to see more P3s, given needs and
available sources of financing
P3 Project Stakeholders
Cost Certainty v. Fair Risk
Allocation
• Cost certainty
• Fair risk
• allocation
Risk Allocation –
Owner Retained Risks
Transfer of Risk/Obligation
• Goal: Optimize levels of risk and
obligation for each party
Managing Risk –
Transfer of Risk / Obligation
Change in Law Supplier default
Cost overruns Input demand
Defects/warranty Offtaker default
Dispute risks Operational
Environmental Permits
EPC contractor default Concessionaire default
Force majeure Liquidated damages
Managing Risk –
Transfer of Risk / Obligation
Project revenue Site - fossils
Public entity default Step-in rights
Schedule Third party default
Set-off Variations
Site acquisition
Site - geotechnical
Site - environmental
Risk Allocation –
Owner Retained Risks
While every project is unique, many Canadian P3 projects have
proceeded with the Public Owner retaining the primary risks
associated with:
• some demand risks (i.e. the future demand for the use of the asset,
although this depends on the type of asset)
• property acquisition
• baseline geotechnical investigation and assessment
• new or undisclosed site contamination
• relationships with First Nations and archaeological issues
• approvals, developing environmental performance criteria, and
auditing compliance with applicable environmental regulations
• procurement risks (such as a lack of bidders or delays in the
procurement process)
• interest rate changes between the time of the selection of the
preferred proponent and financial closing
Risk Allocation – Risks Transferred to
Construction / Services Contractors
Risks typically transferred to the Project Company, and
also on to the Construction and Services Contractors,
include:
• design and construction
• utilities coordination
• permitting
• lifecycle costs
• some demand risks
• industrial relations
• implementation of environmental management systems
• existing or disclosed site contamination
• communications with local stakeholders
Risk Management Insurance Tools
The usual insurance policies come into consideration on
these P3 construction projects:
• Builders Risk
– inclusive of Delay in Start Up (DSU) coverage.
– design exclusion challenged and pushed.