Risk Management in Transport PPP Projects
In the Islamic Countries
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Table 15: Overview of elements of Phase 6) End of contract
Phase Elements included
End of contract  Contract return: What are the main cost and benefit of the different PPP solutions
with respect to the transfer/concession of the public asset implemented?
 Follow up: Which mechanisms enable to systematically follow up on risk
management practices and learn from experience? What are the main success
factors for better transport PPP implementations?
Source: Authors.
Contract return
The final phase of a PPP contract is about managing the transition of assets and of operations at
the end of the contract duration. This transition should be clearly addressed in the PPP contract,
by defining how the quality of the assets will be assessed at the end of the contract term, whether
on asset handover a payment will be made and how the amount of such payment shall be
determined (The World Bank et al., 2017). The APMG PPP Certification Guide (APMG, 2016)
suggests a period of at least three years prior to the expiry of the PPP contract for the
government to start to examine its options and for the contract management team to assess the
asset’s conditions.
The defining element of termination is the handing over of project assets back to the public
sector once the PPP contract term has reached its end. At this stage, the transfer risk arises, i.e.
the risk that the conditions of the project assets at the end of the contract term (when they are
transferred back to the government) are not in compliance with the PPP contract’s maintenance
and performance standards. This risk is borne by the private party. A thorough procedure to
verify compliance with the required asset hand-over standard specified in the contract is
necessary, and should be carried out prior to the expiry date. In fact, the private partner has an
incentive to reduce its maintenance effort in the later years of the contract. The procedure
should examine the assets and foresee measures of remediation.
The termination of the contractual relationship between the parties implies that also the
provision of the services comes to an end. Assets are divided among the parties and a settling is
carried out of all remaining obligations, together with a calculation of the compensation payable
on termination. At this point, however, continuity needs to be ensured. To allow the
government to provide the service, the private party guarantees some residual life of the asset
at the expiry date.
For the public sector to take over the service delivery, it is crucial that a proper assessment
process is put in place before the termination of the contractual relationship in order to verify
whether the necessary resources (e.g. in terms of financial and human resources) are available
or if additional measures (e.g. in terms of recruitment) need to be taken instead.
The PPP contract, in addition, sets out the conditions under which the contract may be
terminated earlier than initially planned, i.e. if the early termination risk materializes.
Contractual provisions on this point include specification on who may terminate and for what
reason, and what if any compensation payment will be due under the different circumstances.