Public Private Partnerships

Public Private Partnerships

The Worldwide Revolution in Infrastructure Provision and Project Finance

Darrin Grimsey and Mervyn K. Lewis

This path-breaking book considers the recent trend for governments to look increasingly to private sector finance, provided by private enterprises constructing and managing public infrastructure facilities in partnership with government bodies.

Chapter 8: The Governance of Partnerships

Darrin Grimsey and Mervyn K. Lewis

Subjects: economics and finance, financial economics and regulation, public finance, public sector economics


STAGES OF A PPP TRANSACTION A number of major steps are involved in a PPP transaction. These are normally divided into the development phase and the realization phase. Figure 8.1 presents a graphical depiction of the two phases. Financial close, the time at which the financing package has been agreed and committed to, marks the end of one and the beginning of the other. Because the financiers commit to financing a project based on a completed contractual framework between the public procurer and the project company, the commercial close, or the signing of the PPP agreement is a defining pre-requisite for reaching financial close. So far in this volume we have concentrated on some of the issues related to reaching this point. This chapter considers the post-financial close stages, and focuses in particular on contract management. Once the contract has been signed, it then has to be managed by the public sector agency which is responsible for monitoring and implementing the contract. Our aim here is to outline a contractual management and reporting regime to aid this function, indicating the degree to which project objectives are being achieved and providing an early warning of potential problems. Special emphasis is given to establishing, first, key reporting requirements for the meeting of performance quality standards and, second, a performance monitoring system for assessing the ‘health’ of the contracting enterprise and the risk of default – an important factor when government is unable to walk away from providing the core services. Almost invariably, the...

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