The foundational rule of PPP management states that risk must be allocated to the party best able to manage, mitigate, or absorb it at the lowest cost. Arbitrarily shifting all risks to the private partner inflates the project’s risk premium, rendering it commercially unviable. Conversely, leaving inappropriate risks with the state defeats the purpose of the partnership.

To execute the contract, the winning private consortium forms a legally distinct corporate entity known as a Special Purpose Vehicle (SPV). The SPV isolates the financial liabilities of the project from the parent companies’ balance sheets, allowing lenders to secure project assets directly.