Risk Management in Transport PPP Projects
In the Islamic Countries
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Remuneration
BOT PPPs implemented under responsibility of KGM, DHMI and AYGM, with the exclusion of
port and touristic marinas, are remunerated based on fixed demand guarantees, i.e. the
contractors receive a subsidy from the procuring authority as long as the demand does not reach
the threshold set by the procuring authority in the tender specifications. When the traffic
exceeds the demand guarantee threshold, no subsidy is paid to the contractor. Revenue sharing
mechanisms are also foreseen for some highway projects, including the Eurasia tunnel, and for
airport PPPs (see also Section 5.7.6 below).
For BOT commercial ports and touristic marinas under the responsibility of AYGM, as well
as for TOR projects in the airport sector under the responsibility of DHMI, there is no
remuneration to contractors. Instead, the procuring authority is receiving a concession fee
offered by the contractor at the tendering stage.
5.7.5. Construction and asset delivery
Management of risks during design and construction phases
Preliminary project design documentation, including detailed technical specifications, are
elaborated by the procuring authorities for BOT schemes. Environmental Impact Assessment
studies are also elaborated at the pre-tendering stage. Notwithstanding the fact that changes
and adaptations are possible at the construction design stage under the responsibility of the
contractor, technical design risks are retained by the procuring authorities. However, this does
not apply to disruptive technology-related risks. As mentioned in previous sections above the
fact that the General Directorate of Highways (KGM) and General Directorate of State Airports
(DHMI) are following the projects in the respective technical field of planning and operation is
a risk mitigation factor in this respect.
The contractor is responsible for the timely construction of the project and the risks
associated with its implementation according to the foreseen schedule. In case of
underperformance, according to the Turkish law, the procuring authority may apply penalties
or terminate the contract if the delays are attributable to the contractor (Özeke, 2019). For
instance, provided that the contractor is responsible to submit the applications and accomplish
the administrative procedures to develop and implement the project in a timely and professional
manner, the case of delays due to issues in the land acquisition processes or additional permits
and licenses attributable to delays under the responsibility of the public sector do not imply the
application of penalties and are likely to result in an extension of the PPP contract. As
commented above, a systemic monitoring process is however also foreseen by law, which
represents a key mitigation factor towards the timely implementation of the project.
The monitoring system also relates to the early identification of defects . Defects and defects
liability periods are usually specified in the PPP contracts which could be allocated to the
procuring authority (or designer company if different) and the contractor. In the event of
identification of defects under the responsibility of the contractor, the procuring authority may
request the repair of the defect, apply a penalty or terminate the contract (Özeke, 2019).