• Body of Knowledge:
    Operations and Handback
    9. Managing Expiry, Default, and Early Termination Processes
    Early termination of a PPP contract is truly a last resort and must follow a whole range of processes, commencing with an act of default by one of the parties or some continuing force majeure. From a contract management perspective, the focus should be on avoiding termination by managing...
  • Body of Knowledge:
    Structuring and Drafting the Tender and Contract
    9.3 Contract Breaches, Penalty System, and Events of Default
    Section 9.2 has shown how payments are linked to service performance through availability payment mechanisms, so that deductions or abatements are made from the payments commensurate with any failure to meet set service standards or target levels of service. The price paid is therefore adjusted to...
  • Body of Knowledge:
    Structuring and Drafting the Tender and Contract
    9.9 Early Termination Provisions [97]
    Any contract may be terminated early for a number of reasons instead of continuing for its expected life. A typical classification of reasons for early termination is listed below.   Termination for convenience (or "unilateral termination”). The government will always reserve the right to terminate...
  • Body of Knowledge:
    Structuring and Drafting the Tender and Contract
    5.6 Deciding on Risk Allocation
    Default Situation and General Rules When allocating risks, the government should be clear that risk transfer is defined by the contract scope and the PPP contract structure. Subject to the refinement of risk allocation, all risks inherent to the scope of the contract, and those appropriate to the...
  • Body of Knowledge:
    Tendering and Awarding the Contract
    References
      Name of Document Authors/Editors and Year Description http link (when available) Key References for PPP Tender Processes Infrastructure Australia National PPP Guidelines Volume 2: Practitioners’ Guide Commonwealth of Australia (2011). Includes guidelines on PPP tender...
  • Body of Knowledge:
    PPP Introduction and Overview
    8.3. Examples of Project Cancellation due to Improper Process Management [112]
    8.3.1. Arising during Pre-Tender and Tender Phases The following are common examples of poor management during the pre-signature phase of the project process that reflect errors and risks of project failure (to be regarded as a non-exhaustive list). The appraisal may conclude that the project...
  • Glossary
    The following glossary of terms has been prepared by the authors. Some of these definitions are based on external sources, adapted for this PPP Guide, while others have been developed by the authors to reflect common usage and good practice. The main external sources used to develop this Glossary...
  • Body of Knowledge:
    Appraising PPP Projects
    8.1 Measuring Commercial Feasibility
    The commercial feasibility must be assessed from two different points of view: lenders (the debt providers) and investors (the equity providers). 8.1.1 The Lenders’ Perspective (bankability) The key aspect of the lenders’ concerns is the capacity of the project company to repay its debt on the...
  • Body of Knowledge:
    Establishing a PPP Framework
    1.8.1 Types of Fiscal Commitment to PPPs
    Fiscal commitments to PPPs can be payments for services, capital contributions, or subsidies to reduce costs for users, or a means to share risk. The wide range of fiscal commitments can usefully be divided into the following categories. Direct liabilities: known payments that must be made if the...
  • Body of Knowledge:
    Appendix Bid Preparation and Submittal the private sector perspective
    6.7 Responding to the RFP and Submitting a Tender Response
    The complexity of the procuring authority’s PPP project requires the consortium to adopt a project management approach to ensure that all necessary experts and skills are managed in an effective and timely manner. Upon signing the Letter of Intent (LOI), Memorandum of Understanding (MoU), or...
  • Body of Knowledge:
    Strategy Delivery and Commissioning
    10.1. Mechanisms for Dealing with Under-Performance and Non-Compliance
    When dealing with under-performance and non-compliance in the Construction Phase, the issue is not the standard of services provided but rather the time taken to complete the asset and the quality of the asset on completion. In general terms, the private partner is incentivized to bring the asset...
  • Body of Knowledge:
    Appendix Bid Preparation and Submittal the private sector perspective
    6.8 Fundraising
    6.8.1 Negotiating with Banks The consortium’s financial advisory team prepares the Project Information Memorandum (PIM). The PIM sets out details of the PPP project, including the anticipated key contracts and projected revenues. Assuming a financing competition, a group of funders will be asked to...
  • Media:
    Blog posts
    The Pitfalls of PPPs and how to conquer them - by Irina Unkovski
    In a PPP project the public sector invites the private sector, via a bidding process, to design, build, finance and operate an asset in order to provide a service to or on behalf of the public sector. In addition, the project must be affordable, provide value for money, and obtain optimal risk...
  • Body of Knowledge:
    Operations and Handback
    5. Managing Finances
    5.1. Payment Mechanisms The mechanism by which the private partner receives revenue with which it covers its costs, services its debt obligations, and generates a profit must be linked to the performance of its obligations under the PPP contract. The very heart of risk transfer and, therefore,...
  • Body of Knowledge:
    Strategy Delivery and Commissioning
    9. Claims Management in the Construction Phase
    9.1. Importance of Claims Management A claim in the context of PPP contract management is somewhat of a misnomer. Well-structured PPP contracts allow for specific consequences for specific failures by one party to meet its obligations to the other party. These failures normally give rise to a...
  • Body of Knowledge:
    Strategy Delivery and Commissioning
    10.2. Mechanisms for Dealing with Late Delivery of Works
    In PPPs, liquidated damages are the preferred remedy for late service commencement. Liquidated damages are a payment representing a genuine pre-estimate of the actual losses or damages suffered if the private partner fails to achieve service commencement on time. The events giving rise to...
  • Body of Knowledge:
    PPP Introduction and Overview
    7.5. Other Considerations regarding the Project Company's Financial Structure that Influence the PPP Project-Contract.
    In addition to basic concerns about ‘bankability’, governments have other points of concern regarding the private financial package that will influence the project contract structure. These have specific implications in the tender process regulations (RFP) and more especially in the contract...
  • 1.1.6 Completion and Commissioning
    The completion risk or the commissioning risk refers to the risk of failure to meet the construction outcome as prescribed, and/or the project as constructed failing to meet the completion acceptance criteria, thereby causing a delay in earning revenue. It is, in essence, a construction or a design...
  • 1.2.4 Private Perspective Only – Revenue Risk – Government-Pays Counterparty Risk
    In government-pays PPPs, the risk of default by the authority is obviously a private side risk inherent in the strategic decision of investing in a particular country market or in the projects promoted by a particular authority. We basically refer here to credit risk. This is more an issue in sub-...
  • 1.2.7 Availability and QualityRisk (and revenue risk from the private perspective)
    This risk refers to the risk (especially from the public perspective) of the infrastructure not being available to use and/or not meeting the quality or expected performance levels. This risk is borne by the private partner as it is the essence of the PPP objectives. The mechanism to transfer the...