Devising, implementing, managing and monitoring SGs will require significant resources and involve costs for the Government. Setting up an SG for a PPP transaction will require experienced negotiators with a deep understanding of project finance and negotiation. If this resource cannot be found within the Government, it will need to be secured from the private sector at an additional cost. SGs also need to be monitored during their life-time as they entail risk management and additional responsibilities. For instance, SGs will often require the Government to make important decisions (e.g. calling an event of default on a project, making budgetary allocations that will need to be processed internally). Finally, a call under an SG will imply treasury operations to make and receive payments.
Guidance: Prior to committing to an SG, the Government should ensure that clear governance rules are adopted and that it has the necessary resources and skills to manage the SG and monitor the PPP project during their lifetime. In particular, staff should have a framework for making important and rapid decisions. Appropriate legal and financial advice will also be needed if the SG is called. As noted above, following a call on an SG, the Government may assume additional rights and obligations under the project documentation. It will need to ensure it has sufficient qualified staff and access to advisers to address this matter appropriately.