7 Principles for Sustainable PPP Contracts

This is a summary of a publication by David Baxter, Chief PPP Advisor to ISRC

1. It is important that PPP stakeholders understand what the project’s desired outcomes are, and clearly articulate them in their contracts.  Any confusion or ambiguity surrounding outcomes will result in contractual disconnects that will threaten the sustainability of contracts.

2. Sustainable PPP contracts require a high level of sensitivity to both partners expectations and mandates. Full disclosure of all issues pertaining to a project should be a fundamental best practice to ensure that there are no project surprises that could lead to project stressors.

3. It is important to build trust through the relationship and focus on solutions that address issues as soon as they surface. Project sustainability is strengthened through collaborative actions that ensure that the interests of both parties are protected.

4. Traditionally project proponents have focused heavily on value for money (VfM) assessments.  Unfortunately, the implementation of VfM assessments has become rather stagnant and does not fully address the dynamic context of multi-year PPP contracts. Recently the concepts of “value for people” and “value for the future” have introduced novel levels of assessment that account for impacts to communities and future proofing of projects. As these sustainability concepts evolve, they should also be included in considerations for sustainable PPP contracts. It must be pointed out that sustainable contracts can only be drafted if projects are sustainable.  These two considerations are inseparable. 

5. The World Bank states that once a government decides to implement a PPP, tools should be adopted that can help structure a sustainable project. The World Bank also stresses that risk allocation, design contractual provisions, fiscal risk assessment, and stakeholder consultations should be conducted. Only then will governments be able to design efficient and sustainable PPPs.

Tools that can be used to achieve sustainable contracts include the following:

6. Sustainable contracts require a two-way negotiation by all parties that acknowledge the sustainability realities of the project and are focused on a balanced common interest.

7. It is important that the following best practices are implemented:

  • Maximizing the potential of projects through careful planning and sharing of expectations
  • Ensuring that physical and economic constraints are fully integrated with the regulatory environment
  • Understanding how project demand can change and how change can impact the sustainability of projects
  • Developing a programmatic approach to projects that is replicable
  • Developing very clear roles for both public and private sector participants in projects.


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