There is a definite trend toward re-adjusting the risk-reward balance away from the procurers, in the current environment. Whilst market participants appear generally comfortable with the standard terms of PPP contracts, concerns are often expressed on project specific issues e.g.: completion obligations, long-stop dates or transfer of certain un-controllable risks. Credit committees also tend to be more conservative and revisit certain "accepted" principles such as onerous bonding or termination provisions. Procurers should be aware that, at the very least, they should expect unusual risks to be priced into the offers. In this context, more balanced contract terms may prove better value for money.
This is particularly true in a market where preferred bidders have to be selected on the basis of non-committed financial proposals. It is important to ensure that the funders have at least accepted the terms of the PPP contract before confirming preferred bidder status, as failure to do so may expose the procurer to very significant risks of extensive renegotiations post-preferred bidder. It is likely that banks will do so for what the market regards as "standard terms" but will reserve their positions where contracts contain particularly novel or project specific contentious issues.
PROS: Balanced standard contracts are generally advisable, especially in the current sellers' market, where procurers are competing against each other. Unfavourable contract terms may put-off potential bidders and cause programmes to fail. Standard and reasonable contract terms will also accelerate the vetting process by banks.
CONS: Experience shows that "pushing the bidders" can be beneficial to procurers, although it is unsure whether this is a long term benefit. On the other hand, finding the right level of "softening" of contract is not an exact science, and there is a risk of "giving too much away". "Clawing back" when market conditions return to normal, howsoever desirable, is generally problematic.
When standard contracts are being used, opening a few clauses may invite bidders to re-open others.