Risk Management in Transport PPP Projects

In the Islamic Countries

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bids will be evaluated as well as the method used to assess bids and the main terms and

conditions of the contract.

The legal framework provides that a quota (or mandatory percentage) of procurement contracts

must be awarded to domestic firms. Foreign companies are allowed to participate to the bidding

process only for procurements above a certain threshold or for certain contracts. Moreover, a

foreign company is mandated to have a local subsidiary to be eligible to bid. Further, a locally

incorporated foreign company may not submit bids for tenders relating to construction work

below the value of RM 30 million (around USD 7.3 million) nor bid for tenders open only to

Bumiputera companies (company owned by Bumiputera, indigenous people from Malaysia).

There may also be a restriction to bid for tenders pertaining to national defense, hazardous

waste disposal, and security services etc. However, this depends on sector specific regulations

and policies which may have local equity requirements.

The bidder is required to submit proposal within 30 calendar days.

In Malaysia there are

various procurement procedures

available for PPPs, such as:



Open procedure (single stage tendering);



Restricted procedure (competitive procedure with prequalification stage);



Competitive Dialogue and/or multi-stage tendering.

The PPP guidelines provide that all PPP proposals should be submitted directly to the relevant

ministries or agencies. The same holds in the special case of unsolicited proposal. The document

also mentions typical information required for submission of PPP proposals. They generally

entail the justification for the proposal, the business and financial plans, the evidence of financial

stability and capability, the results of the

feasibility studies

(including

socio-economic Cost-

Benefit Analysis

although it is rarely done in practice

), the

indication of the PPP modality

preferred option

including the provision of a

riskmatrix and a systemof riskmanagement

and allocation

between public and private entity, and a proposed payment mechanism.

The PPP guidelines provide also minimum criteria that need to be met by proposals, such as:



Output specification should be clearly identified and quantified;



Economic life of the asset or service should be at least 20 years;



Projects with technological obsolescence risk (technology used will be superseded in short

term) will not be considered;



Project sponsor must be financially strong with a paid-up capital of the special purpose

vehicle (SPV) to be at least 10% of the project value.

Source: World Bank database (2018) on procuring infrastructure PPPs in Malaysia

The decision about which of the different PPP models will be used to implement a transport project is taken

on a case by case basis. However, evidence collected during the interviews shows that BOT and operation and

maintenance schemes are the most commonly used in Malaysian transport PPPs.