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.
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