1. Project Development

What is the appropriate structure for the project? What payment model and performance regime is appropriate?

Incorporate into the business case and procurement strategy the preliminary structure, payment model and possible performance regime. Identify the key project characteristics that will determine which commercial principles should be applied, including whether or not the infrastructure is a single contained site, multi-site, or linear.

2. Commercial principles workshops

What are the key commercial issues for the project that will need to be reflected in the contract between the government and private party?

The project team determines the key commercial issues/structures. These can be further developed at a commercial principles workshop.

Initial assessment at the workshop identifies:

a) issues that can be dealt with based on standard positions; and

b) issues that are project specific or require further analysis and are departures.

Issues that can be dealt with based on standard positions may, depending upon the nature of the project and other relevant factors, draw upon the social infrastructure principles, the economic infrastructure principles or, for hybrid projects, a blend of both sets of principles. (For example, a non-tolled road PPP with availability payments may utilise the social principles related to payment mechanisms and the economic principles related to matters such as "close-out".) Questions such as the following may help to indicate which set of commercial principles may be appropriate:

1. Does the project involve risk from variable demand for services it produces?

2. Could the government transfer demand risk to the private party?

3. Can the private party charge users directly for services the project provides, or earn other revenue from third parties?

4. Is availability of services from the project to all members of the public or a target group a government objective?

5. Would the income stream to the private party be in the form of regular service payments?

Issues that are project specific or require further analysis are the subject of individual papers, with technical advice often required to further define the appropriate commercial position (for example determining the parameters around energy volume risk transfer requires input from technical consultants).

Consideration also needs to be given as to whether the particular commercial principles are relevant to either a single contained site or a multi-site or linear infrastructure.

3. Drafting of contract

Once positions are agreed they form the drafting instructions for the project's contract legal advisors.

4. Issuing the RFP

The contract is issued with the RFP. The RFP may also include a commercial framework summary that reflects the commercial principles that underlie the contract.

5. Negotiation of contract

The project team evaluates the responses from bidders.

The project team enters into negotiations with bidder(s). Any departures from the RFP contract are the subject of negotiations with the bidder(s) and are approved in accordance with Jurisdictional Requirements.

6. Contract Management

The commercial principles that formed the basis of the contract remain relevant in any negotiation that occurs during the life of the contract. Negotiations over risk events and any change in scope negotiations are subject to the contractual framework.