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Under a PPP arrangement, Government will have a direct contractual relationship with Private Party through the Project Agreements.

The Private Party will itself be contracting with various third parties to obtain consultancy services,finance, design, construction and operational services.

In the course of a successful project, Government need not have any direct dealings with those third parties. However, if the Private Party defaults under the Project Agreements, Government may need to deal directly with the financiers in the event that they step into the shoes of the Private Party. Alternatively, if Government proposes to take over the project during the Operating Phase Government may need to deal with the operator.This process will be smoother and faster if the mechanics are agreed upon in advance.

A direct agreement is a contractual document entered into between Government and the third party at the beginning of the project. It is intended to deal with the relationship between these parties on the occurrence of specified circumstances, such as the default of the Private Party.