Risk Management in Transport PPP Projects
In the Islamic Countries
40
materials); v) environmental concerns; vi) access to permits; vii) legal issues; viii) concerns
about the availability of data and information for project appraisal. This checklist can represent
a first tool structuring a systematic effort of data collection and enabling a preliminary risk
identification and risk assessment. If information on these issues is not available, further
studies should be performed.
After the technical soundness and socioeconomic desirability of a transport project are
confirmed, a screening for PPP suitability takes place. It is key for the public entity in charge
of the project pipeline to collect all necessary information that may affect the choice about
whether or not to implement the project through a PPP scheme. Information already collected
for performing the CBA shall be useful for the PPP suitability test as well, e.g. the charging of
user fees; revenue estimates based on traffic forecasts; the need for public contribution. A well-
founded suitability test includes also the description of potential interest from private investors
and the availability of skills by the private sector for such a project. Performing the PPP
suitability test is crucial not only in order to ascertain if the project is appropriate as a PPP, but
also for risk identification. In fact, such test consists in a series of questions to be addressed
(APMG, 2016), among which:
 Are there risks or uncertainties within the project that are not manageable by a private
partner?
 Can the project be embedded within the legal framework as a PPP?
 Is the project size big enough to justify the implicit costs of the transaction (e.g. the
management of a complex tender and contract)?
 Would there be appetite on the side of investors? Are there different competitors
interested in the bid process? Are there already previous transactions developed as PPP
for this type of project in the region or in comparable regions?
 Does bundling construction and operations and/or maintenance in a single contract make
sense? Does it make sense for a single operator to assume the risk and responsibilities in
a unitary project?
 Are the stakeholders’ interests correctly surveyed and understood?
 Are output requirements clearly identifiable?
A crucial part of the pre-tendering preparation of potential PPP projects lies in examining if the
development of the proposed infrastructure project with a PPP scheme can be foreseen to best
achieve Value-for-Money as compared to alternative options. To this end, as a quantitative
support to the decision-making process, public sector comparators can be used, i.e. estimates
of the hypothetical, whole-of-life cost of the project if financed by government under traditional
procurement (The World Bank et al., 2017).
If the suitability test concludes that the project is appropriate for a PPP, the investment can
proceed to the following stage, i.e. the assessment of the feasibility of the project itself as a PPP.
Before this, however, the procuring authority should evaluate the internal resources and skills
for in-depth appraising the potential PPP project, in order to understand whether to perform
this task internally or outsourcing it.