Proceedings of the 14th Meeting of the
Transport and Communications Working Group
8
management, etc.) or external factors (weather, protests, permits, changes in labor costs, etc.).
On this point, the literature frequently refers to the “completion risk”, which materializes when
the project construction is characterized by delays and cost overruns. This phase is heavily
affected by risk management strategies applied in previous phases and particularly benefits
from exhaustive feasibility studies in the pre-tendering phase.
Key messages from the literature review and good practices:
 In addition to the in-depth appraisal of the PPP, it is key for the public authority to know
how residual risks are shaped, how they could materialize and how the reaction to their
materialization would look like;
 In turn, awareness of residual risks and worst-case scenarios points to the need for
establishing within the public sector a contract management team with skills in
monitoring the construction phase;
 A tool for risk monitoring during construction is represented by construction
milestones reliant on the completion of agreed sections, subject to quality requirements.
5. Operation:
The fifth phase of the conceptual framework covers the following aspects: management of risks
during operation; bonus/malus schemes; contract renegotiation.
Analytical points:
Demand, maintenance, revenue, and technology risks are among the most relevant operation
risks. They need constant monitoring and an adequate commitment of resources in terms of
staff, equipment, templates and time planning. As a way to mitigate these risks, it is possible to
link remuneration to performance through penalties or bonus payments, applied in case of
under- or over-performance by the private sector in delivering the service outlined in the PPP
contract;
Unforeseen events (e.g. a financial crisis) may require a new risk-sharing, which can come about
through a renegotiation. Among the causes of renegotiation, there can be also an inadequate
contract, weaknesses in the appraisal’s simulations and opportunistic behavior as well. To
counter opportunistic behavior, a proper regulatory framework is instrumental (for instance in
relation to the prohibition of conflicts of interests or the prohibition of aggressive bids, which
may greatly contribute to a later need for renegotiation).
Key messages from the literature review and good practices:
 Risk during operation may emerge despite a successful performance in the construction
phase;