Module 1: PPP Contract Negotiation & Strategy
This is to brief the participants on the overall objectives of the programme. An overview of the course will be provided and the rules of engagement will be set out.
Planning the process of introducing private participation
Objective: This session will look at the issues governments should consider when looking at involving the private sector, including:
- Documenting particular problems or challenges being faced by the sector and diagnosing the underlying cases of the problems
- Determine whether private participation can address the problems
The session starts with a section analysing key issues related to provision of services including:
- Key areas of responsibility and how can they be defined?
- Key risks related to these responsibilities, and how can they be defined?
- We look at ways of determining the best allocation of responsibilities and risks between the operator and the contracting authority
- The implication of involving different stakeholders in the process of consultation and implementation of the PPP
Risk allocation and contract design
Objective: This session will cover the important task of establishing an efficient allocation of project risks between the public and private sector parties. This risk allocation subsequently forms the basis for many elements of main contractual documents that will provide the legal and commercial basis for a successful PPP. Aspects covered will include:
- Overview of key risks in a PPP project
- The principle of value for money in relation to risk allocation
- The importance of bankability and the need for contractual security
- Key contractual clauses
Case study and worked example of risk assessment
Objective: This session will look at applying some of the basic concepts of risk allocation by describing a real case study (likely in roads, water or energy), and splitting the group into different roles of sponsor, lender and grantor. The project will be assessed against same risk factors, eg land acquisition, rights of way, political and expropriation risk etc. Each team will present its risk assessment against a pre-defined risk matrix. At the end of the session the following learning outcomes are expected:
- Differentiation of risk given different perspectives
- Estimating probability of risk
- Value judgment of risk and implication of risk
- Quantification vs emotion of risk
Preparing and managing the bidding process
Objective: This session will cover the key tasks required in preparing a PPP project for tendering and then managing the subsequent bidding process. Topics will include:
- The importance of market sounding
- Engaging with advisors (legal, financial and technical)
- Preparing key documents (e.g. the RFQ, RFP)
- Bidding and negotiation procedures
- The Preferred Bidder Stage
- Financial and contract close and the swap process
Summary and learning issues
Objective: Every day will conclude with a wrap up of core principles of each one of the sessions, drawing out each of the learning outcome for each session. This wil be done in the form or a real case study eg. Tanzania Water Dar es Salaam failed lease contract (contract was terminated early due to ineffectual risk allocation between parties), or other appropriate case study.
Principles for debt financing and the interest of the private sector
Objective: This session will cover important issues related to project financing to be addressed before and during the procurement of PPP projects.
- How are PPP projects financed?
- What are the main constraints of project financing?
- How a projects financing is structured over time?
- What are the main difference between typical construction financing and PPP financing?
- What are the main typical financial risks involved for investors in PPP projects and how are these typically managed?
- How can investors and lenders expectation be usefully managed throughout a PPP procurement process?
Managing the preparation of the contractual documentation
Objective: This session will outline the process of preparing the suite of contractual documents that are required for a successful PPP project. The session will interact with participants by doing a quick survey of the different experiences amongst the students, by asking each to outline their experience to date in preparing contractual documents and any issues/problems they currently face. The course leader / teacher will then present an overview of the process and share best-practice. This will be followed by an interactive Q&A session.
Managing prequalfication and bidding process
Objective: This session will cover the procurement of PPP projects, focusing more specifically on the selection of proposals/bidders. The session will also solicit experiences from the audience. In addition the session will show different PQ and bidding specifications in different sectors.
Fiscal impact of PPPs, risk management framework, management of contingent liabilities
Objective: This session will look at the issues that arise in terms of obligations from government and the public sector in PPPs. Some of these obligations are direct (ie explicit) yet others are contingent. Despite being contingent, these should be adequately understood and provided for. The session will therefore look at:
- Mechanisms to distinguish between direct and indirect liabilities
- Liability treatment depending on national legislation and accounting treatment (Eg EU Eurostat approach etc)
- Mechanisms to deal with contingent liability, valuation and probabilistic scenario testing
- Some of these principles will be illustrated by recent examples (eg toll roads in Spain and Portugal) where some of these issues led to catastrophic failure of high profile road PPPs.
Wrap up and conclusions
- Course review questionnaire to assess course
- Distribution of reading material
- Overall Q&A
Module 2: Structuring & Managing PPP Legal Agreements