Risk Management in Transport PPP Projects
In the Islamic Countries
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Contract renegotiation
Changes in the ownership structure (i.e. stakeholder composition) of the private partner are
possible specified that the criteria outlined in the guidelines on Concessionaire Shareholders
Changes are met. However, the Malaysian regulatory framework does not regulate any other
modifications (apart force majeure circumstances) or cases leading to renegotiation of the PPP
contract after the signature (The World Bank, “Benchmarking PPP procurement 2017 in
Malaysia”). Nevertheless, UKAS’ role includes the support to both the public and private party
in structuring and implementing contract renegotiations in case of unexpected changes or
events after the contract is signed.
In the specific case of the highway sector (which is under the control of the Ministry of Work)
changes have been successfully negotiated. In some cases, this has been done at the
concessionaires’ expense (for example, in the past a standard automatic tolling mechanism has
been installed on all concession roads at the concessionaires’ cost). In some other cases,
government has either paid directly for enhancements or awarded partial payment and
extension of concession.
5.6.7. End of contract
Contract return
At the end of the concession period the ownership is transferred to the public authority,
following an audit process to check the conditions of the assets involved.
The audit process66 generally regards the 24 months before expiration of concession period.
For the transfer process, the contract agreement states the working conditions of assets.
The assets need to be well functioned and in good performance. If the asset has a problem the
concessionaire must repair and ensure its optimum performance before the audit. In addition,
the agreement generally states the depreciation and write-off method for the valuation of assets.
In all types of PPP models, the government is not liable to pay any settlement charges except any
arrears (Ahmad et al., 2018).
In the case of road transport, there are specific clauses that regulate defects and their repair.
This is however not the case for the residual life of the concession asset for which no method for
its computation is established. The past experience has demonstrated however a tendency of
the government to grant extensions of the concession periods, in particular as a form of
compensation in case of government’s failure to follow a contract or motivated by
adjustments/expansions of the investment programs at the basis of the concession (JICA, 2010).
66 A process audit is an examination of results to determine whether the activities, resources and behaviours
that cause them are being managed efficiently and effectively. A process audit has to establish whether the
results are being generated by an effectively managed process.