Risk Management in Transport PPP Projects
In the Islamic Countries
46
Performance metrics and performance monitoring are directly linked to an ongoing activity of
riskmonitoring during construction and operation. Public authorities monitoring performance
usually check that the private partner has put in place: appropriate systems, procedures and
resources to deliver the output specified in the performance-related obligations in the PPP
contract and a quality assurance system for self-monitoring (APMG, 2016).
For the monitoring and assessment of transport PPPs, performance measurement systems (i.e.
sets of metrics used to quantify efficiency and effectiveness, and measure the outcomes) can be
built by identifying performance measures first (e.g. time from tender notice to financial close;
delays; cost overruns) and evaluating the degree of success of each of them. To evaluate the
overall performance, the individual performance measures may also be attributed different
weighting factors (see Villalba-Romero and Liyanage, 2016).
Furthermore, it may be noted that the rationale behind performance metrics and performance
monitoring varies between the construction and the operation phases. During the first one,
performance is monitored to ensure that the provided facilities are in line with the PPP contract,
that work progresses according to the schedule, and that overall contract obligations are being
met. Performance monitoring during operation is instead focused on the achieved quality of the
service requirements (APMG, 2016).
At the contract structuring stage, provisions should be added to the PPP contract in order to
ensure that the consequences for failure to reach the required performance targets are specified
and enforceable and that step-in rights for the public party to temporarily take control of the
concession under certain well-defined circumstances are foreseen (The World Bank et al.,
2017).
Remuneration
In transport PPPs, as in other sectors, remuneration allocated from the public authority to the
private partner should be commensurate to the delivered service. As such, there is a direct link
between performance metrics and remuneration. Adjustments to payments reflecting risk
factors are also instrumental for creating an appropriate incentive structure for stakeholders,
and for allocating risk in the PPP contract (The World Bank et al., 2017).
Remuneration can take place through user charges, government payments or both. Usually,
the private sector is allowed to charge users of public service fees. As a recent development,
though, availability-based payment PPP structures have emerged, whereby the private sector
receives predefined payments from the public authority for the PPP contract’s duration. Such
payments can either be fixed or variable, based on the sharing of demand risk between the two
parties. Availability payments can be based on level of use (e.g. shadow tolls), or on the mere
asset availability (Carbonaro et al., 2017).
In case the private partner’s revenues depend on user charges, during the contracting phase a
series of parameters are to be taken into account for proper PPP contract management (APMG,
2016):