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Risk in Public-Private Partnerships

Risk in Public-Private Partnerships. Professor Christopher Bovis. Categorising Risk in PPPs. Underlying theories Transaction Cost Economics Principal-Agent theory Incomplete Contracting The relative importance of perceived risk. Categories. Representation and relational Risk

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Risk in Public-Private Partnerships

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  1. Risk in Public-Private Partnerships Professor Christopher Bovis

  2. Categorising Risk in PPPs Underlying theories • Transaction Cost Economics • Principal-Agent theory • Incomplete Contracting • The relative importance of perceived risk

  3. Categories • Representation and relational Risk Relational risk is therefore grounded on the presence of information symmetry and satisfactory cooperation in the inter-organisational and intra-organisational relationships formed by the contract • Performance Risk The risk that the intended outputs of the contract (both in terms of the deliverables and its end product) fail to perform as per the set contractual requirements, and exacerbated by unanticipated issues with time, cost, quality and relational factors • Financial Risk An umbrella term, for which a number of forms of risk associated with the behavioural response to fiscal mechanisms and their outcomes. In the contractual sense, risk attributed to this category may include, but are not restricted to: (i) financial transactions (ii) risk of default (iii) remuneration, (iv) pricing, and, (v) penalties • Contract Risk Probability of loss arising from a party reneging on the contract, as opposed to their inability to pay

  4. The Spine of a PPP Contract

  5. RepresentationRisk Migration 1. Definitions & Interpretation 2. Period of Contract 3. Order of Precedence 4. Warranties & Representations 5. Deliverables 6. Liquidated Damages 7. Force Majeure 8. Price and Payment 9. Pricing on Ascertained Costs 10. Sub-Contracting 11. Commercial Exploitation Levy 12. Advertising and Publicity 13. The Authority’s Remedies for Breach of Contract 14. Progress Meetings and Reports 15. Marking of Deliverables (Documents) 16. Government Furnished Assets 17. Liability 18. Insurance Requirements 19. Use of the Authority’s Information Technology 20. Publication (Academia) 21. Contractors Personnel – Research Workers 22. Purchase Orders under a Framework Agreement 23. Cooperation 24. Options 25. Principal Obligations & Responsibilities of the Contractor 26. Transfer of Undertaking (Protection of Employment) Known as TUPE 27. Termination 28. Investigations 29. Cooperation of Parties 30. Key Performance Indicators (KPIs) 31. Step In’ Rights 32. Entire Agreement

  6. Performance Risk Migration 1. Definitions & Interpretation 2. Period of Contract 3. Order of Precedence 4. Warranties & Representations 5. Deliverables 6. Liquidated Damages 7. Force Majeure 8. Price and Payment 9. Pricing on Ascertained Costs 10. Sub-Contracting 11. Commercial Exploitation Levy 12. Advertising and Publicity 13. The Authority’s Remedies for Breach of Contract 14. Progress Meetings and Reports 15. Marking of Deliverables (Documents) 16. Government Furnished Assets 17. Liability 18. Insurance Requirements 19. Use of the Authority’s Information Technology 20. Publication (Academia) 21. Contractors Personnel – Research Workers 22. Purchase Orders under a Framework Agreement 23. Cooperation 24. Options 25. Principal Obligations & Responsibilities of the Contractor 26. Transfer of Undertaking (Protection of Employment) Known as TUPE 27. Termination 28. Investigations 29. Cooperation of Parties 30. Key Performance Indicators (KPIs) 31. Step In’ Rights 32. Entire Agreement

  7. FinanceRisk Migration 1. Definitions & Interpretation 2. Period of Contract 3. Order of Precedence 4. Warranties & Representations 5. Deliverables 6. Liquidated Damages 7. Force Majeure 8. Price and Payment 9. Pricing on Ascertained Costs 10. Sub-Contracting 11. Commercial Exploitation Levy 12. Advertising and Publicity 13. The Authority’s Remedies for Breach of Contract 14. Progress Meetings and Reports 15. Marking of Deliverables (Documents) 16. Government Furnished Assets 17. Liability 18. Insurance Requirements 19. Use of the Authority’s Information Technology 20. Publication (Academia) 21. Contractors Personnel – Research Workers 22. Purchase Orders under a Framework Agreement 23. Cooperation 24. Options 25. Principal Obligations & Responsibilities of the Contractor 26. Transfer of Undertaking (Protection of Employment) Known as TUPE 27. Termination 28. Investigations 29. Cooperation of Parties 30. Key Performance Indicators (KPIs) 31. Step In’ Rights 32. Entire Agreement

  8. ContractRisk Migration 1. Definitions & Interpretation 2. Period of Contract 3. Order of Precedence 4. Warranties & Representations 5. Deliverables 6. Liquidated Damages 7. Force Majeure 8. Price and Payment 9. Pricing on Ascertained Costs 10. Sub-Contracting 11. Commercial Exploitation Levy 12. Advertising and Publicity 13. The Authority’s Remedies for Breach of Contract 14. Progress Meetings and Reports 15. Marking of Deliverables (Documents) 16. Government Furnished Assets 17. Liability 18. Insurance Requirements 19. Use of the Authority’s Information Technology 20. Publication (Academia) 21. Contractors Personnel – Research Workers 22. Purchase Orders under a Framework Agreement 23. Cooperation 24. Options 25. Principal Obligations & Responsibilities of the Contractor 26. Transfer of Undertaking (Protection of Employment) Known as TUPE 27. Termination 28. Investigations 29. Cooperation of Parties 30. Key Performance Indicators (KPIs) 31. Step In’ Rights 32. Entire Agreement

  9. CombinedRisk Migration Map 1. Definitions & Interpretation 2. Period of Contract 3. Order of Precedence 4. Warranties & Representations 5. Deliverables 6. Liquidated Damages 7. Force Majeure 8. Price and Payment 9. Pricing on Ascertained Costs 10. Sub-Contracting 11. Commercial Exploitation Levy 12. Advertising and Publicity 13. The Authority’s Remedies for Breach of Contract 14. Progress Meetings and Reports 15. Marking of Deliverables (Documents) 16. Government Furnished Assets 17. Liability 18. Insurance Requirements 19. Use of the Authority’s Information Technology 20. Publication (Academia) 21. Contractors Personnel – Research Workers 22. Purchase Orders under a Framework Agreement 23. Cooperation 24. Options 25. Principal Obligations & Responsibilities of the Contractor 26. Transfer of Undertaking (Protection of Employment) Known as TUPE 27. Termination 28. Investigations 29. Cooperation of Parties 30. Key Performance Indicators (KPIs) 31. Step In’ Rights 32. Entire Agreement Representation Risk Performance Risk Finance Risk Contract Risk

  10. Risk Migration • Results are balanced based on Risk Reversion • Influencing factors • Contract drafters • Contract monitors • Contract enforcers

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