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Co., ctor, manude nt of will ment sset the forent, y. In may the will manderrn a mbiand ance ause ageject n as ight conment erns erm om te, te cing ns, s, d RISK |29 maintenance cost of the asset. "Everybody's vested interest is in making sure the project first is viable, and will be built and operated as designed," says Daniel Bénay, a partner at McCarthy Tétrault LLP in Montréal. While the allocation of risks is spelled out in the project agreement signed upon completion of the bidding process, the management of those risks is an ongoing exercise in teamwork. "The contract is an abstract piece of paper," says Bénay. "You have to be there [on the ground] to see exactly what's being done. You can't simply say, 'there is my contractual responsibility,' and then hope for the best. It's a continuous process where each party has to be directly involved. That controls the cost and the quality, you avoid surprises, and the finished product is always much better." But what if the unforeseen happens and no party is at fault? "It should have been made very clear in the contract who bears that responsibility and the financial risk," says Pennycook. "In doing so, [the contract should specify] how decisions are made on how to handle it — and how it is inspected to be sure that, in the end, everything is dealt with according to acceptable standards. "There are some risks that government will retain, because their likelihood is low and the cost of transferring that risk [to the private sector] is very, very high. There's always some give and take there. Who is in the best position to assess and manage the risk — and at what cost?" It may not be practical, for example, for the government to shift all of the site risk to Project Co. Ideally, the government would share with Project Co. all of the information that it has on the site's condition — whether that be soil contamination or the presence of an ancient burial ground. Government would also give the private-sector partners the opportunity to do their own due diligence on the site. They may wish, for example, to have hydro-geologists inspect the terrain. "To the extent that you don't provide sufficient access or time to do due diligence," says Houston, "and yet you insist upon them taking on all the risk in any event, then the great equalizer for the transfer of risk is price." Project Co., if boxed in by government, will fall back upon pricing, building in a contingency to cover this risk. If the government decides it doesn't want Project Co. to boost the project's price tag accordingly, it has the option of retaining some or all of the site risk for itself. "The risk transfer [to the private sector] is never total," says Houston. "They get it as close as possible, but there are certain residual risks that you're never quite successful in saddling the private sector with." "TO THE EXTENT THAT YOU DON'T PROVIDE SUFFICIENT ACCESS OR TIME TO DO DUE DILIGENCE, AND YET YOU INSIST UPON THEM TAKING ON ALL THE RISK IN ANY EVENT, THEN THE GREAT EQUALIZER FOR THE TRANSFER OF RISK IS PRICE." Sheldon Gordon is a Toronto-based writer on legal and business affairs. Lexpert®Ranked Lawyers Pennycook, Carol D. Perron, Jacques Plotkin, Ella Posen, Stephen Powell, Kerry R. Pritchard, Andrew Davies Ward Phillips & Vineberg LLP (416) 863-5546 cpennycook@dwpv.com Lavery, de Billy, L.L.P. (514) 877-2905 jperron@lavery.ca Fasken Martineau DuMoulin LLP (416) 865-4489 eplotkin@fasken.com Minden Gross LLP (416) 369-4103 sposen@ mindengross.com Gowling Lafleur Henderson LLP (403) 292-9805 kerry.powell@ gowlings.com Norton Rose Fulbright Canada LLP (613) 780-8607 andrew.pritchard@ nortonrosefulbright.com Ms. Plotkin focuses on infrastructure/P3, and advises lenders and sponsors on project finance/development. She has acted on major projects including Niagara/Bridgepoint Hospitals, Windsor Essex Pkwy, Thunder Bay Courthouse, Alta Schools I and others. Mr. Posen focuses on complex commercial real estate and leasing. He acts for sophisticated landlords and tenants. A frequent author and lecturer, he has served as arbitrator, mediator and expert witness on various leasing issues. Mr. Powell practises in the areas of construction, engineering and surety matters with emphasis on contract document preparation, negotiation and interpretation, claim preparation and analysis, and plaintiff and defence litigation representation. Mr. Pritchard's corporate, commercial, real estate and development practice includes expertise in structuring P3s, project development and financing. Financial institutions and borrowers are among his clients. Ms. Pennycook focuses on finance, banking, M&A, PPPs and reorganizations. She represents borrowers, arrangers and lenders/ syndicates in project and infrastructure financings, debt offerings and structured financings. She is a director of P3 Canada. ROB-Infrastructure.indd 29 Mr. Perron specializes in infrastructure and transportation law, and commercial litigation. With more than 25 years' experience in the railway industry, he serves clients operating road, rail and air infrastructures in their business transactions. 13-08-06 10:23 AM

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