Risk Management in Transport PPP Projects
In the Islamic Countries
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system can be based on the information recorded by the project company in charge for project
monitoring. The contract should also include reporting requirements about detail, format and
frequency of performance reporting. The public authority should scrutinize the extent to which
the project company’s monitoring of the project is effective in maintaining existing risks under
control, also by conducting sample checks and audits to ensure correctness and completeness
of the collected information (and the PPP contract should foresee for the public party the right
to do so). However, it may be noted that some PPP contracts also give the public authority the
right to carry out its own monitoring at the cost of the project company.
Another available instrument for risk monitoring during construction is represented by
interim construction milestones reliant on completion of agreed sections of work, subject to
quality requirements (Global Infrastructure Hub, 2018), which can act as both progress
monitoring and payment incentive tools. Most importantly, such a system also allows the public
entity to obtain an early indication of delays that could be mitigated before affecting the
completion deadline and thereby jeopardizing the timely delivery of the public service.
For an appropriate risk treatment during the phase, the PPP contract should also include
consequences for failure to reach the required standards, such as penalty payments, and the
circumstances under which the public party is allowed to take control of the construction.
Further, contractual provisions may also mitigate the risk of cost overruns by outlining
circumstances under which additional equity or additional financing could be provided (Global
Infrastructure Hub, 2016).
3.2.5. Operation
The fifth phase in the conceptual framework, Operation, is divided into three elements. For each
of them, the following Table sets out the relevant questions that guided the analysis throughout
the study.
Table 14: Overview of elements of Phase 5) Operation
Phase Elements included
Operation  Management of risks during operation: Which practices are adopted
for the management of unforeseen risks during project operation? Which
methods or institutions are in place for risk monitoring? Is there any
evidence of a need to adopt new statistical indicators and/or dedicated
agencies or offices for the monitoring of the performance of PPPs?
 Bonus/malus schemes: Which bonus payments or penalties for the
private party are foreseen during operation?
 Contract renegotiation: What are the causes that lead to contract
renegotiations? What are the successful methods and practice to approach
contract renegotiations? Which are the conditions in the contract that can
be changed without inducing opportunistic behavior, and might therefore
legitimately be renegotiated, if any? What are the main costs and benefits,
if any, to renegotiate the contract?
Source: Authors.