1. Project risk and Government support
UNCITRAL Third International Colloquium on Public-Private Partnerships (PPPs) October 2017, Vienna
Experts for Chapter II
Project risk and Government support
October 2017

2. Possible future work on PPPs
General concerns of Group II members
General improvements considering PPP developments
MLP and LG: sufficiently open texts to be applicable in developed and in developing countries
Different levels of
Public-private governance
Corruption
Certainty of public payments (gov. support)
Wording adjustments to
improve the Model Legislative Provisions
improve Legislative Guide
better align the two UNCITRAL texts

3. Possible future work on Ps
PROPOSALS FOR CHAPTER II
New chapter: Preparatory Measures and Project Selection – essential to project success
 previous to actual Chapter II, that contains “Coordination of preparatory measures”
via slidehunter.com (copyright-free)

4. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
General proposals
Use “PPP” instead of “concession”
 “Concession” should only be used as one of the different types of contract considered in the PPP expression
Replace “Concessionaire” for “private partner”
Replace “Concession contract” for “PPP contract”

5. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
General proposals
The manner in which pre-selection criteria will be evaluated and scored/ranked should be clearer
Revise bidders’ inviting process, when short- listing is allowed
Re-draft unsolicited proposal process to promote competition, transparency, consistency, economy, and efficiency

6. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
General proposals
Add requirement that unsolicited proposals be subjected to project screening and selection processes
Establish competitive processes for soliciting competing proposals

7. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
Value for Money – VfM: in selection of project phase
 motivation for the administrative choice of a project or the PPP form for a project
Can be reached through comparators, like Public Sector Comparator – PSC
via theconversation.com (copyright-free)

8. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
VfM
Insertion of three economic analyses in texts:
1) Cost-benefit and social impact analysis (possibly using PSC);
2) Value for Money (strict) analysis; and
3) Affordability analysis
This previous phase could be mandatory for governments before launching a project

9. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
VfM
Analyze whether VfM makes sense in developing countries: in most there are not viable comparators
 Establishing a link between VfM and the proper allocation of risk may be a challenge
Establishing the need of creating VfM procedures would be a way to develop countries for PPP arrangements?

10. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
Socio-economic policy goals – analyze the purpose of PPP projects
Should the SDGs be taken in account for a PPP project choice?

11. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
Exclusivity
May be a good instrument, but, for the protection of competition, it:
deserves a specific recommendation
 consider compliance, anticorruption, antifraud and anti-collusion measures
should be restricted to the minimum required and without affecting the possibility of future development for the country

12. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
Risk allocation
Is different in Civil Law and Common Law systems
Varies as a result of the private partner's remuneration source: whether by the end-user (concession system) or by the public partner (wholly or partially)
the certainty of payment by the public partner is crucial

13. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
Risk
New topic: requirement for a Risk Matrix
Clarifies risks and its sharing
Is a well-known instrument
Should be present in LG and in MLP
Adoption of proper institution and procedures for assessment and mitigation of risk
Use of Public Investment Management (PIM) (World Bank instrument) – in LG

14. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
Risk
The content of the most recent World Bank Reference Guide (risk-related examples) can be mentioned in the LG, in categories (high-low, project, State etc.)
Establish if risk transfer or limitation of risk is, in some extent, intrinsic to PPP format
Consider wording for risk analysis and managing involved in financial modeling

15. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
Risk
Governments: establish and express clearly reasons for risk transfer – accordingly to VfM and budget analysis
Provisions on risk sharing, operation/operating risk, demand and supply risks to be expanded
Risk allocation accordingly to budget risks – in case the Government has no or less budget to cover its commitment to the project

16. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
Risk
Risk allocation should be implemented regarding the regulatory system of each country
Risk allocation should change considering natural monopolies and possible competition
Possible new section: “Mechanisms of managing the risks that belong to responsibility of the public partner” – institutional and legal mechanisms for monitoring risks assumed by the public partner – foresee enforcement measures

17. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
Risk
Possible new section “Mechanisms for the fulfillment by the public partner of its obligations under a PPP contract in the event of risks materialization
Risk quantification and risk assessment wording to be expanded in MLP and LG
Re-drafting of Recommendation 13 – clarify

18. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
Government support
Which forms of government support are suitable for PPPs?
In which cases does it make sense to provide them?
Governments should state clearly why support the project and the reasons for using the means chosen
Procedure for assessment of need and justification of Government support or guarantee and award process to be fixed by law

19. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
Government support
Clarify “degree” of guarantees – breaking even/guarantees or tariffs covering all costs and investments /direct subsidies and linking it to the risk
Two essential elements of previous decisions to government support – identify and increase :
attractiveness of the project
means to guarantee the fulfillment of the public partner obligations

20. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
Government support
Identify properly availability payment system
Possible: add section “Impact of risks distribution on state budget deficit and debt”
Redraft ancillary resources wording
Address budget risks and specify mitigation measures

21. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
Government support
Wording for taking account of all guarantee(s) obligations even if off balance sheet/budget
Incorporate international practices for backstopping government related to obligations in PPP contracts
Ministry of Finances to take account of and manage every support, direct or indirect – direct and contingent liability

22. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
Government support
Government support and guarantees should be valid and remain binding all over the contract life
Granted support do not disqualify the contract as a PPP – Civil law, in general, and EU requires at s least some risk assumed by the private partner
Make mandatory or recommend as good practice the use of political risk insurance for PPP contracts

23. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
Guarantees provided by international financial institutions (IFI)
New wording: the role of step-in-rights considering other IFI guarantees
Participation of IFI in the structuring of the projects for which they plan to provide guarantees: direct agreements / tripartite agreements

24. Possible future work on PPPs
PROPOSALS FOR CHAPTER II
Thank you
Group II