3.2.6 Prepare draft PPP contract <1>(2)

A full draft PPP contract should be attached to the invitation to tender. It should cover the following topics at a minimum:

□ Rights and obligations of the parties

□ Risk allocation (including risks related to site issues)

□ Payment mechanisms (tariffs, subsidy, grants) and adjustments to payments in response to various contingencies (see Box 4 Payment Mechanism).

□ Service performance standards and targets and objective and measurable indicators

□ Procedure for permitted modifications, as well as their scope and nature

□ Penalties (and possibly bonuses)

□ Security and performance bonds, insurance

□ Term of contract

□ Conditions for termination (categorised by party and by type of event) and compensation upon termination (for each type)

□ Step-in rights (both for lenders and, in emergency situations, the public sector)

□ Definition and impact of force majeure and change in law

□ Dispute resolution procedures

In the past, it was sometimes the practice to include only a summary of the main commercial terms with the invitation to tender. Nowadays, it is considered better practice to prepare and issue a full draft contract - and this, in effect, becomes necessary in both the restricted and competitive dialogue procedures given the limitation on negotiations after receiving the final bids. Legal advisors should be involved in preparing this full draft of the PPP contract.