Risk Management in Transport PPP Projects
In the Islamic Countries
168
A PPP contract standard model is not in use in Algeria and all contractual elements shall be
detailed in the agreements specific to the individual Public-Private Partnership initiatives. This
also applies to the risks potentially affecting PPP projects throughout all phases of delivery of a
PPP contract, including project development, implementation, operation and closure. In fact the
existing Algerian Public Procurement Code does not include standard provisions relating to the
identification and allocation of risks and their management.
Notwithstanding the absence of such provisions, according to a study by the European
Investment Bank undertaken in 2011 it is possible to elaborate an indicative allocationmatrix
of the main categories of risks usually applying to PPP projects. The Table below provides a
summary of the allocation of the risks between the public and the private sector outlining the
underlying rationale, according to this study (EIB, 2011).
Table 33: Indicative risk matrix in transport PPPs in Algeria (by risk category)
Risk type Risk category Usual allocation of risks (public/private/shared)
Context-
related
risks
Political and
legal risks
In general terms these risks are borne by the private party, who is
responsible of the for changes in the contract that may derive from a
change in law and financing cost.
Macroeconomic
risks
Macroeconomic risks are under responsibility of the public party.
Inflation and exchange risks are mitigated by price inflation adjustments
by the public party and the risks associated with the management of the
liabilities and fiscal risks possibly applicable to the PPP contract is also
borne by the public party.
Project
risks
Financial credit
risks
The current legislative provisions require that lending shall be provided
by national banks. Financial credit risks are also generally retained by
the public sector .
Design,
construction and
operation risks
Depending on the structure of the project risks associated with the
conception and design of the project, as well as for engineering and
construction defects could be either on the public or private sides (for
instance in the above-mentioned BMT PPP project the public has been
responsible for the works concerning the basic port quay structure and
the private of the superstructure related infrastructure and equipment).
The private party is generally responsible for the management and
operation of the infrastructure. Depending on the project the public
sector may retain the risks related to urban and environmental permits,
whereas land concession related risks are borne by the public.
Financial
sustainability
risks
The private sector is also generally responsible for economic and
financial risks, business, commercial as well as management and
performance risks, including demand risks, except from those contracts
where subsidies are foreseen.
Other risks
(force majeure
and early
termination)
Force majeure and early termination risks are shared specified that
according to the EIB, most contracts do not appear to offer adequate
protection of the private party investment in case of contract termination
(EIB, 2011). Cases of force majeure and early termination are to be
specified in the PPP contracts.
Source: Authors based on EIB, 2018.