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Appraising PPP Projects

44.1 Developing the Scope of the Contract

As introduced in chapter 3.6, the Identification Phase will likely have provided a basic scope of the contract, describing what elements of the technical solution selected for the public need will be delivered by the private partner under the PPP contract.

However, in some projects, defining the scope of the contract is not a simple matter. There are projects that may be developed and managed under different contract scopes, reserving certain obligations or services to other parties or to the public sector.

For example, a hospital project may be conceived as a pure infrastructure project (developing and managing the physical facility), or it may include provision of the clinical services. When no clinical service is transferred to the private partner, a decision must be taken as to whether or not to include soft services (such as catering and cleaning) in addition to hard services (such as maintenance), or which soft services to include in the boundaries of the contract. For example, in British Columbia, Canada, the Abbotsford Hospital and Cancer Centre, one of the first PPP projects undertaken by the province, included a full suite of soft services (but not clinical services). However, all subsequent health care projects developed by the province have defined a much narrower scope for their contracts.

Another sector example is rail infrastructure. The features of the PPP contract (particularly the risk structure and the revenue regime) are significantly different when operation of the transport services is integrated with the management of infrastructure within the contract (for example, in many Light Rail Transit [LRT] and metro projects), compared to projects in which the private sector only provides infrastructure services without the actual operation of trains (typical in High Speed Rail [HSR] projects or any heavy long-distance rail systems open to competition).

Other examples of sectors and project types in which the scope of the PPP contract may vary significantly (such as water, rail, and roads) have been introduced in chapter 1.6.

Thus, the scope is a fundamental decision to delineate the boundaries and interfaces between the public and the private sectors. It also defines the general framework from which to outline the technical and performance requirements and the context to decide upon the revenue regime (see section 6.6), which will form the basis of the financial and risk structure of the PPP.

 

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