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Body of Knowledge:
Structuring and Drafting the Tender and Contract
When the usage level of the asset is not relevant for the purpose of the public party (that is, it is not of itself a public objective), but it is still paramount that the asset be available for use by the final users, for instance health workers in a hospital, then payment should be based on the...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
An exact definition for risk is hard to find and its measurement is controversial as well. In literature, the word "risk" is used with many different meanings. The Oxford English Dictionary defines risk as "chance or possibility of danger, loss, injury, etc.”.
In the context of an infrastructure...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
Privately financed infrastructure PPP contracts have long terms so that the government can obtain Value for Money (VfM) from life-cycle management and from effective risk transfer. There are other factors that can provide an incentive for the government to extend the term. However, at some point,...
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Body of Knowledge:
Operations and Handback
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,...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
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...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
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...
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Body of Knowledge:
Strategy Delivery and Commissioning
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...
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Body of Knowledge:
Strategy Delivery and Commissioning
Performance monitoring may be defined as an assurance role played by the government (primarily through the contract management team although other affected agencies and departments may also be involved) where assurance is obtained that the private partner has:
· Adequate systems, policies,...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
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...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
Risk allocation: definition and rationale
Risk allocation is the exercise to define which party will assume each risk, identifying which risks the private partner will be (or remain) responsible for and to what extent, and identifying which risks the public partner will be responsible for and to...
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Body of Knowledge:
Strategy Delivery and Commissioning
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...
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Body of Knowledge:
Appraising PPP Projects
Estimated risk-adjusted costs are a central output of the design of the technical requirements, and this data is used to feed the financial model. Depending on the type of infrastructure, the nature of this data can change. However, the typical sets of cost estimates that should be produced at this...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
3.1 Establishing the Project Team, Incorporating Advisors and Finalizing the Project Management Plan for this Phase
It may happen that the project team was established before appraisal, contracting advisors to handle both appraisal and the structuring and drafting of the tender package. Otherwise...
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Body of Knowledge:
Operations and Handback
As in the Construction Phase, during the Operations Phase, the immediate mechanism to deal with non-compliance and contract breaches is typically a mechanism that has financial consequences for the private partner. However, the system and instruments for managing under-performance (by providing...
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Body of Knowledge:
PPP Introduction and Overview
This PPP Guide focuses on PPPs as a method for procuring infrastructure development and management on the basis of private finance, as introduced in box 1.3. The definition of a private finance PPP provided in this PPP Guide implies a number of features which need to be present in a PPP contract to...
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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...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
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...
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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...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
5.4.1 Quantitative Assessment and Appraisal
As noted, a quantitative assessment (estimating or defining values of the possible outcomes or “expected values”) is usually applied during appraisal for financial analysis and VfM. This is also referred as “adjusting values to risk”, and it is also...
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Body of Knowledge:
Establishing a PPP Framework
Finally, having executed the contract, the PPP enters the final and longest “stage” – managing the contract throughout its operational phase. The challenge is to ensure the PPP provides Value for Money throughout the contract, not just at the Construction Phase. This typically requires ongoing...
