Key issues in designing PPPs

A full draft PPP contract should be attached to the invitation to tender. It should cover the following topics at a minimum:

• the rights and obligations of the parties;
• risk allocation (this is usually achieved through setting out events which give the PPP Company a right to some compensation);
• service performance standards and targets, which need to be objective and measurable;
• the procedure for permitted modifications, as well as their scope and nature;
• payment mechanisms (e.g. tariffs, subsidies, grants) and adjustments to payments in response to various contingencies (see Payment mechanism for more information);
• penalties (and possibly bonuses) which have financial consequences or give rise to warning notifications (eventually leading to termination of the PPP contract);
• security and performance bonds;
• project insurances;
• the term of the PPP contract;
• the conditions for termination (categorised by party and type of event) and compensation upon termination (for each type);
• step-in rights (both for lenders and, in emergency situations, the Authority);
• the definition and impact of force majeure and changes in law; and
• The dispute resolution procedure.