5.1.3  Managing changes provided in the PPP contract

PPP contract changes are easier to deal with if appropriate procedures are in place. The tender documents and consequently the contract will typically set out the triggers and methodologies for adjustment but may not detail all the steps that need to be undertaken to implement the changes. In the case of changes provided for in the tender documents and in the contract, the contract administration manual, in addition to specifying the responsible departments or staff, should contain clear terms and specific conditions governing:

□  who can request a change;

□  who should be involved in assessing the impact of the change;

□  who can authorise the change; and

□  how the implementation of the change is overseen and verified.

It is relevant to distinguish between routine changes, extraordinary changes, and contingency plans provided in the contract:

□  Routine changes to the contract will normally be dealt with by the contract management team. In this context, typical changes provided for in the contract are changes in payment amounts through benchmarking, market testing or other mechanisms, such as indexation or adjustments in response to changes in traffic volumes, for example<1>

□  Changes provided for in the contract that are related to extraordinary events are more complex and need in many circumstances to be elevated to a more senior level for the final decision. For example, certain changes in output specifications, the refinancing of the deal or changes in the law are often dealt with as extraordinary events. The contract manual should set out in detail the terms and conditions governing the criteria for pricing, limited output variation in the contract and refinancing, and any grounds on which the concessionaire or the contract management team may refuse to implement a variation. Provision is made in many contracts for refinancing debt or equity. The contract may also cover sharing of gains from refinancing (see Box 6 Sharing gains from refinancing). It should be noted that the consen f lenders may be required for the types of changes noted in this section.

□  For emergency events, that is, unplanned or unexpected events that threaten the ongoing provision of services, a set of protocols developing a contingency plan should be in place. Such a plan has to be consistent with the basic responsibilities set out in the PPP contract. Protocols can cover scenarios such as: <2>

□  business continuity and disaster recovery planning;

□  public sector step-in planning; and

□  default planning.

In all cases, it is important to exercise best efforts to respect the terms of the PPP contract, taking advice as appropriate<3> (4)