Risk Management in Transport PPP Projects
In the Islamic Countries
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relationship between public and private sector entities do have a significant influence over the
identification and assessment of risks by all parties involved in a PPP and over their
allocation. The ability of a legal framework to ensure the effectiveness and enforceability of
long-term PPP contracts is a major prerequisite for private investors to expose their capital to
risk. For instance, in the case of user-fee PPPs, private investors need clarity about the
commitment of the government to implement a price policy that will ensure the financial
viability of the contract. Moreover, from a procedural perspective, the legislation must provide
for a transparent and competitive framework for procurement processes, promoting multiple
bids and clearly defining the criteria to evaluate proposals, thus minimizing the corruption risk.
Since high risk perception translates into low investor appetite, no PPP program can perform
positively if the conditions for private sector participation have not been developed through an
appropriate legal, regulatory, institutional, and contractual framework (World Bank and PPIAF
2017).
Institutional arrangements
Considering the complexity of managing PPP contracts, specific institutional arrangements are
needed to translate political will and legal provisions into the implementation of PPPs in general
and in the transport sector. In order to facilitate this task, it is common to create a dedicated
unit centralizing expertise on PPPs in a single government agency (either as a separate entity,
or within an existing department).
Irrespective of the existence of a PPP unit, however, the allocation of tasks and responsibilities
to the government bodies in charge of managing PPPs should be structured along the different
stages of a PPP project. Three main stages can be recognized in this respect (The World Bank,
2018a; COMCEC, 2019):
 Preparation: this stage includes identification of projects, PPP suitability test, project
appraisal and approval; in the Conceptual Framework of this study, it is covered by Phase
2, Pre-tendering decision process;
 Procurement stage: this stage includes the choice of tender procedures and the
evaluation of bids; it is covered by Phase 3, Procurement and contracting;
 Management of the contract: this stage includes contract implementation, monitoring
and evaluation; it is covered by Phases 4 to 6, i.e. Construction, Operation and End of
contract.
At the early preparation stage, the possibility of a comprehensive risk identification and
assessment relies on institutional structures enabling specialized staff to carry out these
activities. During procurement, considerations on risk allocation characterize the drafting of
tender documents, but also the evaluation of bids, carried out by a PPP evaluation committee
working on the basis of established evaluation criteria. At the contract management stage, risk
monitoring and treatment require appropriate management systems, tracking contract
implementation. Therefore, PPP units and in general all public sectors bodies tasked with
managing transport PPPs and specifically their risks require specialized staff with a variety of