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PPP TOOLKIT for Improving PPP
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Sector: State Highway  |  Module 2: Work through the PPP process

First draft of key project documents

The first draft of key project documents should be prepared prior to the application for In-principle Clearance. These would typically include a draft of the concession agreement, as well as drafts of the first-stage bid documents (EOI and/or RFQ depending on the type of procurement process selected).

The draft project documents will support the In-principle Clearance application by providing additional detail to the clearance authority. These rough drafts will also be needed in advance of issuing the EOI and/or RFQ.

The structure and critical details of the draft documents will flow from the findings in the feasibility study. An RFQ will typically include the following:

Description of key project details, including:

  • Description of the project scope and objectives, with a focus on the services to be provided including indication of performance levels
  • Envisaged PPP mode and financing mechanism
  • Payment mechanism (eg, user charges, government payment, other source, or a combination)
  • Project timeframe and indicative schedule

Details of the procurement, including:

  • Qualifying criteria for the evaluation and selection of shortlisted bidders
  • Process for submission and evaluation
  • Details of pre-submission conference or meeting and of other opportunities to ask questions or seek clarifications
  • Indicative procurement schedule
  • Other general instructions to applicants
  • Application forms (as annexes)

An EOI would also include enough description of the project so that potential bidders are able to asses whether they would be interested. However, in contrast with the RFQ, at the EOI stage it would usually not be necessary to include details of the procurement procedures.

The standard clauses in a Concession Agreement include:

  • Contract date and key dates in the concession life (including termination)
  • Obligations, rights and restrictions on the private partner (concessionaire), including a description of the services to be provided and performance obligations
  • Obligations and rights of the public partner
  • Mechanisms for payment, including the rights (if any) of the concessionaire to gather direct or indirect revenue from the project
  • Rules and procedures for making changes to the scope during the life of the project
  • Requirements and procedures for auditing and monitoring performance
  • Penalties in case of non-performance
  • Step-in and substitution rights
  • What happens at the end of the project (termination) including, if appropriate, transferring assets to the public sector
  • What happens if the project is terminated early
  • Arrangements for dispute resolution
  • Other standard clauses such as change in law, force majeure etc

The details of the EOI / RFQ and the concession agreement will depend on the particular details of the project. However, as indicated by the lists above, there are broadly standard contents that are common across projects. This makes it possible to start with a model document and add project-specific details to this as required.

Getting the Concession Agreement right is critical to a successful PPP project. The CA is the main contractual document for the PPP. It spells out the rights, responsibilities and obligations of all parties. This makes it vital not just as a bidding document but as the foundation for the management of the contract throughout the life of the PPP. For this reason, the process of preparing to manage the PPP contract begins at this time  in Phase 2 and continues when the Concession Agreement is finalised in Phase 3 (see Phase 4 for more information about contract management for PPPs).

In some sectors in India the relevant Authority has prepared standard model documents for PPPs. For example, model concession agreements have been prepared for highways and ports. Model documents have the advantage of streamlining the document preparation process, providing a standard risk allocation framework, and benefiting from past experience and best practice. In some cases projects that have used the relevant model agreement are able to progress more quickly through the approvals process.

Drafting project documents is a specialist task and advisors would ordinarily be engaged to do this. Where model agreements are used they may be adapted in-house by the Sponsor if it has the necessary expertise. However, even in this case it may still be preferable to seek external advice, particularly if the project is complex or innovative.

 

 

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