Risk Management in Transport PPP Projects
In the Islamic Countries
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Remuneration
As mentioned earlier, the main difference of the two categories relate to the type of
remuneration: in the first category (public service delegation and concession agreements) the
contract holder generates revenue through the commercial operation of a project (in particular
the fees paid by users); in the second category (partnership agreements or self-governance
contracts), a private sector entity is paid rents by the public part for building or renovating and
operating an infrastructure. In the case of a partnership agreement, the remuneration of the
contractor may also be linked to performance objectives assigned to it.
Revenue or demand guarantees have been used occasionally in Côte d’Ivoire, and their use is
considered an exception, especially given the negative experience with the 3rd bridge in Abidjan.
A more common approach to improve the financial profitability of a project is the revision of the
perimeter of activities allocated to the private party: in such approach, part of the investment is
implemented by the public authorities, this ensuring adequate financial profitability of the
residual investment under the responsibility of the private party. Such approach has been used
in the port sector (being the infrastructure developed by the port authority and the
superstructure provided by the terminal concessionaire) and in the public transport sector (for
instance a similar scheme is being considered for the BRT line in Abidjan). In other cases, public
authorities can retain the cost for land purchase and basic infrastructure provision, also with
the aim of improving the financial viability of the PPP initiative.
Finally, revenue-sharing mechanisms are also in use in Côte d’Ivoire in case of projects with
sufficiently high and quite predictable expected revenues. This is generally included in contracts
as a pre/defined percentage of revenue that is returned by the private operator to the
contracting authority.
5.2.5. Construction and asset delivery
Management of risks during design and construction phases
Once the contract is signed, its implementation is monitored according to the provisions set in
the agreement itself. This is generally achieved establishing a Project Management Unit (or
committee), in charge of managing and monitoring the PPP from the contracting authority’s
perspective. In addition, a technical body (such as BNETD) is appointed to control that
construction follows the agreed technical requirements and specifications. Reporting
obligations of the private party are also set in the agreement, but ad hoc reporting can be
requested by the committee. As a minimum, the operator produces an annual report including
accounts tracing all transactions relating to the execution of the PPP contract and an analysis of
the quality of the works or services.
In what concerns specifically the construction phase, the monitoring system focuses essentially
on the physical and financial progress of the project, including estimates of ongoing work, and
periodic project follow-up reports are produced. Projects are generally also subject of periodic
review by the institutions involved in their co-financing.