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

Preparation for contract management

Contractual preparation - get the Concession Agreement right

The best contractual preparation for PPP management is to get the Concession Agreement right when it is developed in Phase 2 and finalised in Phase 3 (see Phase 2 of the toolkit for further details of the contents of the Concession Agreement and model Concession Agreements provided in the tools and resources section).

This means preparation for contract management and monitoring starts before Phase 4 of the PPP Process.
The Concession Agreement is the most important document that defines the roles and responsibilities of all parties to the PPP. This includes setting out the obligations of all parties, the requirements for performance, the obligations for monitoring performance, and what happens in the case of under-performance.

A well designed Concession Agreement will create the conditions to incentivise the private partner to deliver the services at the agreed standard. These conditions include empowering the Sponsor to effectively monitor and enforce the terms of the agreement.
It is also important to remember that the Sponsor, as the public sector partner, has obligations under the PPP too and that its performance is also governed by the terms of the Concession Agreement. A well-organised private partner will be aware of these obligations and will be monitoring Sponsor’s own performance.

Model Concession Agreements for PPPs are available for certain sectors in India (for example, in the roads and ports sectors). These model contracts are based on accumulated knowledge and experience from PPPs carried out in India and elsewhere. Where available, they provide a very good starting point for developing the Agreement for a new PPP since they already include many of the contractual structures for major risk allocations, performance standards, monitoring, mechanisms for dealing with under-performance, and processes for contract closure. These can then be tailored as required to meet the contractual needs of the particular project.

 

 

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