Before we begin our analysis, some may naturally question why are we discussing financing structures if, as we will see, collaborative delivery at its core reduces disputes, aligns incentives through shared risk and reward, reimburses costs on an open-book basis, and leaves the public owner or governmental entity bearing residual construction and other project risk once participants' pain-share capacity (typically capped at profit) is exhausted?

The first and most fundamental reason is scale. Complex infrastructure (transit systems, energy transition assets, healthcare facilities) requires capital measured in hundreds of millions or billions of dollars, concentrated in the early years of a project's life. Public appropriations are done through annual budget cycles and are subject to competing fiscal priorities. Will the timing and quantum of available funds always match the project's expenditure profile? Even where the owner intends to fund entirely from its own balance sheet, it is drawing on government borrowing capacity, issuing bonds, or seeking appropriations, each of which is itself a form of financing that must be structured, priced, and sequenced. The notion that a publicly financed alliance project avoids financing altogether is therefore misleading, as it simply shifts the financing to the government balance sheet, with resulting constraints on fiscal capacity, borrowing limits, and opportunity cost.

Second, pure collaborative delivery, precisely because it operates on a cost-plus basis with no fixed-price ceiling, creates open-ended fiscal exposure for the owner. The Target Outturn Cost (or such other equivalent benchmarking tool) is a performance benchmark that triggers gain-share and pain-share, but (unless otherwise addressed in the documents) it is not a contractual cap on what the project will cost. Once participants reach their pain-share limit, every additional dollar of cost growth falls to the owner without limit. In the base case scenario, collaborative incentives may contain cost growth effectively. But collaborative delivery does not eliminate the possibility that external, unanticipated or unplanned elements (such as geotechnical failure, prolonged force majeure, cascading supply-chain disruption, regulatory change) drive actual costs beyond the TOC estimates, exhausting participants' capped exposure and leaving the owner with residual obligations that may exceed what was contemplated in annual budget cycles or appropriation authorities. The absence of any contractual ceiling on construction expenditure, combined with the absence of liquidated damages for delay or underperformance, means there is no contractual remedy if the project materially exceeds its budget or schedule.

Third, relying exclusively on public appropriations constrains the owner's ability to access diversified source of capital. Infrastructure investors, development finance institutions, pension capital, and specialized bond markets each bring different risk appetites and pricing. A purely publicly financed alliance forgoes these benefits entirely, even though the project's characteristics (long asset life, essential service, and government backing) would make it attractive to multiple classes of capital.

Fourth, collaborative delivery in its purest form does not address the operational phase. Once construction is complete, the asset must generate revenue (through regulated tariffs, availability payments, user charges, or other mechanisms) to fund operations, maintenance, and lifecycle renewal. Structuring those operational-phase cash flows in a manner that is predictable and bankable is itself a financing requirement, independent of who assumed construction risk. A project delivered through a pure alliance during construction still requires a revenue stream during operations, and the project documentation will determine whether additional capital can be raised efficiently against the completed asset.

Lastly, although this may be our personal view, once final procurement documents are issued and negotiations are completed, participants will often find that the public owner or governmental entity is not, in practice, bearing most or all residual construction cost and project related risk. Affordability caps, off-ramps, prescriptive subcontracting requirements, and the political imperative to demonstrate value for money all operate to redistribute risk away from the owner in ways that may not be apparent from the collaborative framework alone. The practical result is that residual or stranded risks (i.e. those that neither the pain-share regime nor the owner's fully absorbs) remain in the structure, and the market must find ways to mitigate, price, or finance those costs through the instruments and mechanisms discussed in this article.

In short, pure collaborative delivery addresses how a project is procured and built, but it does not, by itself, answer where the capital comes from, how it is sequenced, what disciplines govern its deployment, how tail risks1 are absorbed if they materialize, or how the completed asset generates bankable returns. These are financing questions, and they persist regardless of whether the owner bears all, most, or none of the construction cost and project related risk.

[1] A tail scenario, in this context, refers to a low-probability but nonetheless material event occurring that drives actual costs beyond the TOC or approved budget.


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  1. Introduction
  2. Why does financing remain necessary under collaborative delivery?
  3. What is bankability? 
  4. What are the collaborative delivery models? 
  5. Core principles of collaborative delivery models 
  6. Core principles of traditional project finance 
  7. The issues between collaborative delivery models and traditional project finance 
  8. Available solutions and potential structuring 
  9. Conclusion