• Body of Knowledge:
    Structuring and Drafting the Tender and Contract
    9. Defining and Drafting Other Commercial Terms and Contract Provisions [82]
    Sections 4 and 5 of this chapter have extensively described financial and risk structuring matters. The defined structure (that is, all features related to risk allocation and risk treatment) and features related to the financial structure (means of compensation when there is more than just the...
  • Body of Knowledge:
    Structuring and Drafting the Tender and Contract
    9.1 Main Contents of the Contract: Rights, Obligations and Framework to Govern Changes and Risks
    The structure of the contents of the contract document may vary significantly from country to country, and even depending on the authority or level of government within the same country. It is preferable that the structure of the contents, the nomenclature, and the treatment of many commercial...
  • Body of Knowledge:
    Structuring and Drafting the Tender and Contract
    9.2 Performance Requirements and Performance Management
    Performance requirements may be considered a part of the broader concept of "technical requirements" or "technical specifications", which in general terms refers to the specifications in the contract for what is requested of the private partner in terms of quality and/or quantity. Performance...
  • 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
    9.4 Compensation Events and Rebalancing
    When a compensation event occurs, the private partner has the right to claim compensation to offset the loss suffered or that will be suffered, or part of the loss suffered in shared risk events. The loss may include forgone revenues (for example, revenue lost due to a delay in construction, where...
  • Body of Knowledge:
    Structuring and Drafting the Tender and Contract
    9.5 Other Financial-Related Provisions
    Chapter 1 introduced a number of topics that are typical considerations for the public partner. These are related to the financial structure of the project contract and should be documented in the contract. See section 0.7.3, especially the following. The problem of leverage and requirements for...
  • Body of Knowledge:
    Structuring and Drafting the Tender and Contract
    9.6 Confidentiality and Information Disclosure
    A sound framework should encourage proactive information disclosure of both the project contract and the project’s performance. This is done in order to promote transparency and gain an acceptance of the PPP model by the general public as well as allowing for performance auditing of the PPP program...
  • Body of Knowledge:
    Structuring and Drafting the Tender and Contract
    9.7 Contract Changes
    As noted, the contract must have flexibility built in to enable changing circumstances to be dealt with as far as possible within the contract. In this sense, the contract should consider and permit certain potential changes (which may be subject to limits in quantity or the law may provide those...
  • Body of Knowledge:
    Structuring and Drafting the Tender and Contract
    9.8 Dispute Resolution
    As in any complex contract, especially those of a long-term nature, it is not possible to foresee every event that may happen and affect a PPP contract. Therefore, changes will happen and this can often lead to disputes. Also, it is logical that some provisions in the contract may require...
  • 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
    9.10 Hand-Back Process
    The assets will be “handed-back” to the procuring authority at contract expiration. It is good practice to establish minimum criteria to be met by the assets so as to ensure that these are transferred back to the procuring authority in an acceptable condition. It is also good practice to note that...
  • Body of Knowledge:
    Structuring and Drafting the Tender and Contract
    10. Control Check and Approvals before Launching the Tender, and Planning Ahead
    The last tasks of the process in the Structuring and Pre-launching Phase will include the following. Formally raising the necessary approvals, packaging all tender documents, and running a control check. This is explained below; and Planning the Tender Phase/tender process. The tender process...
  • Body of Knowledge:
    Structuring and Drafting the Tender and Contract
    11. Summary of Outcomes of this Phase
    The outcomes of the work undertaken during this phase are: The full tender package is complete and ready to be published. (As described in this chapter, the RFP terms and especially the final contract terms may be subject to refinements or even changes during the tender process. This is...
  • Body of Knowledge:
    Structuring and Drafting the Tender and Contract
    References
    Name of Document Authors/Editors and Year Description htpp link (when available) Key References for PPP Structuring Infrastructure Australia National PPP Guidelines Volume 2: Practitioners’ Guide Commonwealth of Australia (2011). Includes guidelines to structure PPP...
  • Body of Knowledge:
    Structuring and Drafting the Tender and Contract
    Appendix A– Description of Main Risks in a PPP and its Potential Allocation
    [25] Section 7.5 ("Calibration") of the Standardization of PFI Contracts guide (HM Treasury UK, 2007) provides useful information and advice on this matter...
  • 1.1 Describing the Main Risks during the Construction Phase, and Their Potential Allocation
  • 1.1.1 Land Availability and Acquisition
    The land or site for building the asset may already be available, or it may be in the hands of the authority, and available for use. However, in most of the cases it is not. In such cases, land has to be acquired. This is especially complex in linear infrastructure, such as roads and rails where...
  • 1.1.2 Environmental
    Most projects will be required to pass an Environmental Impact Assessment(EIA). Environmental issues may be related to a number of different aspects, which can be grouped in two categories. The potential impact of the project in terms of contamination or pollution (gas emission, noise pollution...
  • 1.1.3 Permits
    As with the environmental impacts and environmental clearance, the government should try to anticipate and obtain permits based on the outline plans for the works (or a reference design, if that has been prepared). This is done in order to mitigate risks and prepare the project. It should also be...
  • 1.1.4 Design Risk
    Broadly speaking, design risk may refer to the following two type of events. Defects in the design that result in the asset being built, but failing to meet the prescribed standards, legal requirements, and any conditions imposed by environmental or other stipulations. Such circumstances mean...