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Supplement No. (Q)
Standard PPP Contract
The template will present a set of standard provisions for PPP Contracts.
The three primary objectives in developing a PPP Contract Template are to:
Create a common understanding among agencies about the risks and key considerations to address in a PPP Contract;
Reduce the time and costs of negotiating PPP Contracts; and
Create a tool to help standardize basic provisions, to the extent possible, within PPP Contracts among agencies in KSA.
In general, these standard provisions will be the basis for a draft PPP Contract that should be part of the bid package (together with the RFP and supporting documentation) to be approved for the tender process for any proposed PPP project.
It must be remembered that the suitability of various terms and conditions must be determined for each PPP project individually. This consideration is an important part of an agency’s overall project design and appraisal of bidders’ proposals.
In addition, it is common practice globally for agencies to retain qualified advisers to assist with the development and finalization of PPP Contracts.
The template will give directions and instructions on how to write and what to include in each clause. If it is possible, an example clause is provided. Some clauses will not have examples as these vary greatly from one project to another.
The example clause includes entries in blue color between square brackets to be changed by whom is preparing the template and the values provided in blue are just examples and shall be changed to reflect the conditions of the project.
TABLE OF CONTENTS
Template Introduction 2
Duration of PPP Contract 7
Agency's role prior to service commencement 8
Critical Dates 9
submission of designs and information to agency 10
Private Partner Warranties 11
Agency's Warranties 12
performance monitoring 13
Performance Levels 13
Monitoring Methodology 13
Commencement of Performance Monitoring 14
Performance Monitoring Cost 14
Qualitative Performance Factors 14
General Maintenance 16
Maintenance Survey 17
changes in services 18
Notification and Specification 18
Private Partner, S Estimations 18
Agency Approval 19
Change Implementation 19
Protection against late / sub-standard service delivery 20
service interruptions due to supervening events 21
Compensation Events 21
Relief Events 22
Force Majeure Events 23
price and payment mechanisms 25
auditing of the project by the agency 27
consequences of poor performance 28
change in law 29
Early termination of the PPP Contract 30
Early Termination for Agency Default 30
Early Termination for Private Party Default 31
Early Termination for Force Majeure 32
Early Termination for Corrupt Acts 32
private Partner indemnities 36
information and confidentiality 37
intellectual property rights 38
dispute resolution 40
<This clause shall identify all the definitions used in this PPP Contract. Definitions vary from one project to another, and so the examples given below are not comprehensive.>
Example Definitions used in this template PPP Contract
In this PPP Contract, unless the context otherwise requires, the following capitalized terms shall have the meaning assigned to them below:
The Saudi government body interested in the PPP Project;
Any day except Thursday and Friday or any public holiday;
The [xth] anniversary of the [Signature Date];
Any organization, person, or company providing financing to the Private Party under a financing Contract;
The Agency and the Private Partner;
The Availability and the Performance deduction;
This Public Private Partnership PPP Contract between the Parties;
All assets as required to design, construct, install, operate, and/or maintain the project including facilities, books and records, spare parts and tools, Intellectual Properties, and any agency assets;
All the deliverables that the Private Partner is supposed to develop under the terms of this Contract
The actual commencement of the Services;
Service Commencement Date
The date of Service Commencement;
The services to be provided by the Private Partner to the Agency;
The date of signing this PPP Contract by the last signing Party;
The counter-parties of the Private Partner;.
The charges payable to the Private Partner in connection with performing its obligations included in the Project Deliverables;
< This clause shall set forth the principles that will govern the interpretation of the language, definitions, and other terms used in this PPP Contract.>
Duration of PPP Contract
<Specify in this clause the duration of the PPP Contract.
The PPP Contract must specify its duration. Along with specifying the duration of the PPP Contract, other different dates shall be specified in this clause:
Service Commencement Date: The date at which the service delivery starts
Long Stop Date: It is a late service commencement date; non-fulfillment of it may entitle the Agency to immediately terminate the PPP Contract.
Expiry Date: The date specified at the time of signing this contract for which the contract will terminate.
Specifying the Duration of the PPP Contract is influenced by many factors that may lead to longer or shorter durations.
Some of the factors that influence the duration are:
The requirements of the Agency in terms of Services, the more complex the longer the duration is.
The affordability of the services for the Agency in terms of financial constraints and budgets . Longer periods are more affordable as this reduces the Unitary Payments.
The need for a major refurbishment or replacement programs in respect to Project Assets over the Project Term.
The term of the debt, where a longer debt service period leads to a longer duration.>
Example Standard Clause
This PPP Contract and the rights and obligations of the Parties under this PPP Contract shall take effect on the Signature Date.
The Service Period shall commence on the Service Commencement Date and terminate on the earlier of the Expiry Date and the Termination Date.
Agency's role prior to service commencement
<Specify in this clause the Agency's role after Signature Date and prior to Service Commencement Date.
The Agency's role after the Signature Date and before the Service Commencement Date can be (assuming there is a design and construction phase):
Reviewing and commenting on, but not approving, any changes in the Private Partner's design. The costs of the new designs shall be borne by the Private Partner.
Reviewing tests of any document being developed.
Reviewing Private Partner's activities like quality management which need to be pre-agreed and incorporated in the PPP Contract.>
< Specify in this clause the late service commencement date.
This clause specifies a date where it is unacceptable to start the service beyond. If the Private Partner is unable to start the service before this date, then termination of the PPP Contract is an option for the Agency.
The Agency should have a contingency plan in this case. It should be mentioned in this part of the PPP Contract that all the costs incurred because the Private Partner is not able to meet this critical date should be carried by the Private Partner.>
submission of designs and information to agency
<This clause specifies how to handle the submission of designs and information to the Agency before commencing any service delivery.
The PPP Contract should mention a mechanism that facilitates:
The submission of key aspects and designs of the project by the Private Partner to the Agency and including them as annexes of this PPP Contract.
The Agency has the right to review and comment on submitted designs to ensure that those serve the desired output specifications.
The Private Partner should have a mechanism to submit minor changes to designs that do not lead to changes in service (See Clause 11: Changes in Services).>
<A warranty is meant to confirm the truth of information given by either Party, the Agency and the Private Partner.
The major issues to consider when writing the warranties provisions are:
A breach of warranty in the PPP Contract should not mean a termination of the PPP Contract against the defaulting Party. Instead, a breach of warranty should give rise to a claim for damages under the indemnity provisions of the PPP Contract.
Warranties are given from both sides, the Private Partner and the Agency.
In order to show its good faith, and give the Private Partner some comfort, the Agency should consider on a project-by-project basis whether or not to warrant that it has not knowingly omitted to disclose any important information about the project and the assets in its possession or under its control.
Information warranties about existing facilities and services are to be given by the Agency if the Agency is the only source of such information and that information can not be independently verified.
When the Agency is not the only source of information or the information can be independently verified, then the Agency must not give any warranties regarding that information. Instead the Private Partner shall rely on its due diligence and surveys made available by the Agency.>
Private Partner Warranties
< This clause should list the clauses of the Private Partner warranties.>
Example Standard Clause
The Private Partner warrants that:
It has taken all necessary actions to authorize the execution of this PPP Contract;
All consents required for the development and delivery of the Project Deliverables are in full force and effect at the Signature Date;
No litigation, arbitration, or administrative proceedings is in progress as at the Signature Date, which may have a great impact on the ability of the Private Partner to develop and deliver the Project Deliverables;
All information disclosed by or on behalf of the Private Partner at any time during the tendering process and up to the Signature Date is true, accurate, and complete, and the Private Partner is not aware of any information not disclosed to the Agency, which if disclosed would impact the decision of the Agency to award the PPP Contract to the Private Partner.
< This clause should list the clauses of the Agency's warranties.>
Example Standard Clause
Necessary actions to authorize the execution of this PPP Contract are taken and properly assured; and
No important information in the possession and under the control of the Agency is knowingly omitted;
< This clause of the PPP Contract shall address the following Contractual issues:
Commencement of Performance Monitoring
Performance Monitoring Cost
Qualitative Performance Factors
<The performance levels should be specified in the PPP Contractor as an attachment to the PPP Contract in a more formal document, usually a Service Level Agreement (SLA). Make a citation here to the SLA that should be attached and considered part of the PPP Contract.>
< This clause should specify clearly the monitoring methodology to be followed. Monitoring Methodology clause should have the following characteristics:
The mechanism for the monitoring is a must in the PPP Contract, and it should produce performance assessments for all required output specifications.
The monitoring methodology should concentrate on self-monitoring by the Private Partner and periodic reviews by the Agency.
Periodic reports should be delivered to the Agency by the Private Partner.
The data collected should be relevant and quantifiable, and it should be tied to the unavailability of services, poor performance, and Payment Deductions.>
Commencement of Performance Monitoring
< This clause should specify the dates by which performance levels should be achieved. Some projects may face problems reaching required performance levels during the initial “start up” phase of the project. In such cases, the Private Partner should be afforded a degree of flexibility in achieving the performance levels.>
Performance Monitoring Cost
<This clause should agree on who should pay for the monitoring costs.
As a substantial portion of monitoring is self-monitoring, the Private Partner should bear the costs of monitoring.
In case of any reviews by the Agency, the Agency should bear the costs of its reviews.
In cases where the monitoring systems used by the Private Party are defective, and the output specifications performance levels are not being met so, the Private Partner shall accrue the costs of the reviews by the Agency.>
Qualitative Performance Factors
<This clause of the PPP Contract shall specify how qualitative performance factors (for example the helpfulness of the staff) should be handled where quantifiable factors can not be specified.
The PPP Contract shall determine the output specifications that need to be measured qualitatively and come up with agreed upon clause to mention how to measure such factors. Examples are:
End-user satisfaction surveys: The Private Partner could be obliged to meet the end-user satisfaction surveys although those surveys are subjective and reflect changing perceptions of end-users.
Mystery Shoppers: This removes the defaults of the previous method where qualified individuals are asked to test the service from different perspectives. The disadvantage of this method is that the qualified individual community is smaller than the end-user community.
Sampling: The size and frequency should be agreed prior to signature.>
<This clause of the PPP Contract should specify the reporting requirements associated with the monitoring activities.
The key PPP Contractual issues that need to be agreed upon in the reporting clause should cover:
What are the reports required, by whom, and what is the frequency?
How soon after the monitoring period should the report be received?
<This clause must set out clearly the consequences of any failures by the Private Partner to meet the required performance levels.
The common approach to deal with poor performance by the Private Partner is Payment Deductions. Those deductions should be proportionate to the severity of the poor performance. This relationship should be agreed upon here.