Historically, large-scale projects, particularly those related to infrastructure in the economy, where the exclusive domain of the government or quasi-government autonomous agencies. Over the last two decades, construction, financing, and management of projects such as pipelines for oil and gas, tunnels, and bridges are routinely undertaking by private businesses all over the world. In less developed countries a major challenge faced by these businesses is that the domestic financial market is not well organized and hence project organizers cannot raises needed money.

Carefully read the above statement and answer the following questions:

1. To obtain funds, the company enters comprehensive contracts with different parties: contractors, suppliers, project manager, lenders and even the government. These contracts are to mitigate agency problems and risks associated with the project. What are the main issues concerning risks and agency problem related to project financing?