Risk Management in Transport PPP Projects
In the Islamic Countries
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Risk analysis is instead carried out, according to the guidelines, by systematically estimating
both the size of the potential impact of each risk and its likelihood, in order to then calculate the
total cost of each risk. To this end, the guidelines suggest to arrange a workshop with experts
and to adopt a template for analysis covering five different scenarios: catastrophic; critical;
serious; “no change”; optimistic. The output of such a risk analysis is a matrix illustrating, for
each risk, its probability-weighted cost under the five scenarios. Risks showing high costs will
need special attention during the risk allocation stage.
For the preparation of a recommended risk allocation structure, in fact, the guidelines suggest
to first list, for each risk, relevant mitigation techniques (and provides information on the most
common ones). After this, a risk allocation matrix is to be completed (always by the contracting
authority with help of PPP advisors), indicating whether each risk will be allocated to the public
or private sector or whether it will be shared, as well as motivating the chosen allocation.
Thus, the PPP guidelines provide a sound and well-detailed framework for pre-tendering PPP
appraisal, accounting for risk management dimensions as well. in the near future, further
developments are expected following the possible adoption of amendments to the PPP law. In
particular, discussions are being held over the possibility to include an additional step after the
feasibility study and before the tendering phase, covering the impact of a new PPP on the
national budget: a report Fiscal Commitment and Contingent Liabilities (FCCL) would be
prepared for each project, identifying the fiscal liability of the government. In turn, the
identification of fiscal liabilities would be linked to the degree of tax exemptions or incentives
provided to investors.
5.5.4. Procurement and contracting
Procurement strategies
Once the pre-tendering decision-making is concluded and the set of assessments has led to the
decision to deliver the transport infrastructure and service through a PPP, a tender is launched
for selecting the private partner. To this end, the guidelines suggest a procurement strategy
which can be described as open tendering with pass/fail pre-qualification (or two-stage
open tender). In fact, the guidelines detail how to prepare and issue a Request for Pre-
Qualifications (RFQ) and to announce the pre-qualified PPP bidders shortlist (3-5 bidders)
before issuing the Request for Proposals (RFP).
The RFQ should contain the proposed risk allocation and invite the interested firms to submit
questions and suggestions on it. Further, among the minimum conditions to be met by the
bidder, the RFQ should require risk management experience and capacity (differentiated by
type of risk, if relevant). No restriction applies in terms of investors’ origin: no requirements on
the presence of local investors are foreseen. De facto, the typical bidding consortium is
composed by international investors with local companies.
The RFP should in turn contain among the bid documents a detailed risk allocation matrix. In
addition, the provision of a full draft contract is required, in order to leave little room for
negotiations after the selection of the winning bidder.