Risk Management in Transport PPP Projects
In the Islamic Countries
193
While the choice of the procurement strategy is presented straightforwardly in the national PPP
guidelines, this choice appears to be less univocal in Aqaba. In fact, the choice of the procurement
strategy by ADC varies and depends on the single transport PPP project. Not only open tenders
are used, but also restricted procedures and negotiated processes, following internal practices
and the advice of international consultants.
PPP contractual arrangements
As already seen, BOT is the most common PPP scheme for transport PPP projects in Jordan.
The rationale of risk allocation in PPP contracts, according to the country’s PPP Program, lies
in assigning each risk to the party best able to manage it, thereby maximizing Value-for-Money,
protecting public interests and preventing the government frombeing allocated risks associated
with design, financing, construction, operation and maintenance. The following Table
summarizes the usual allocation of the risks between the public and the private sector in
transport PPPs.
Table 36: Indicative risk matrix in transport PPPs in Jordan (by risk category)
Risk type Risk category Usual allocation of risks (public/private/shared)
Context-
related
risks
Political and
legal risks
Political and legal risks are generally retained by the public sector. As
these risks could reduce the profitability of the project for the private
party, the latter may require compensation payments from the
contracting authority for lost revenue, increased costs or lost profits.
Macroeconomic
risks
While the risk of interest rates on the loans increasing falls mainly on the
private sector, the exchange risk is mostly shared. On the one side, the
project’s profitability would decrease. On the other side, the public sector
may be required to pay higher debt service return.
Project
risks
Financial credit
risks
Credit risks fall on the private sector, as it has the responsibility to
contribute to the financing of the project.
Design,
construction and
operation risks
The private sector is generally responsible for these risks. Land
availability and unsuitability represent exceptions, being borne by the
public sector.
Financial
sustainability
risks
While the private sector is responsible for management risk, demand and
revenue risks are generally shared for airports and terminal projects
(no demand guarantees are foreseen in these projects). For public
transport and rail projects, the demand is subject to guarantees which
partially limit the risk of the private sector.
Other risks
(force majeure
and early
termination)
Force majeure and early termination risks are shared, since if they
materialize, the project is unable to perform.
Source: Authors.
Performance Metrics
The PPP Regulation establishes that the contracting authority shall, supported by the PPP unit,
monitor and audit the private operator’s execution of his contractual obligations. In addition, it