- In PPP models, risks are shared between government and private sector.
- The agreement defines who handles which roles and responsibilities.
- Risks emanating from failure in handling assigned responsibilities are borne by that party.
- Example: Government responsible for clearances/land acquisition, private party for construction/maintenance.
- Political risks (nationalization, war) are typically borne by government.
- Demand risk (low traffic) may be shared, with government providing guarantees.
- HAM model specifically shares financing risk between government and private party.
- This ensures that risks are allocated to the entity best able to manage them.