Guidance 1, 2

A full draft PPP contract should be attached to the invitation to tender. It should cover the following topics at a minimum:

• the rights and obligations of the parties;

• risk allocation (this is usually achieved through setting out events which give the PPP Company a right to some compensation);

• service performance standards and targets, which need to be objective and measurable;

• the procedure for permitted modifications, as well as their scope and nature;

• payment mechanisms (e.g. tariffs, subsidies, grants) and adjustments to payments in response to various contingencies (see Payment mechanism for more information);

• penalties (and possibly bonuses) which have financial consequences or give rise to warning notifications (eventually leading to termination of the PPP contract);

• security and performance bonds;

• project insurances;

• the term of the PPP contract;

• the conditions for termination (categorised by party and type of event) and compensation upon termination (for each type);

• step-in rights (both for lenders and, in emergency situations, the Authority);

• the definition and impact of force majeure and changes in law; and

• the dispute resolution procedure.

In the past, practice was often limited to including a summary of the main commercial terms of the PPP contract with the invitation to tender. Nowadays, it is considered best practice to prepare and issue a full draft PPP contract with the invitation to tender. To avoid repetition and manage market expectations, many jurisdictions have developed standard contracts which set out key contractual clauses and guidance for public authorities in drawing up PPP contracts. Legal advisers should be involved at all stages in preparing the full draft PPP contract.

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