3.1  Length of term

Jurisdictions may either define the contract term:

(a)  as a fixed concession period (e.g. 25 years) commencing from the date of contract signing or Financial Close; or

(b)  as a separate design and construction phase and operating term, with the operating term being a fixed period (e.g. 25 years) commencing from the Date for Completion (thereby fixing the operating term irrespective of when the private party actually achieves Completion).

Depending on which approach is adopted by a jurisdiction, the end of the contract term, subject to any earlier termination, may be either the last day of the concession period or the last day of the operating term.

The contract term will be fixed by reference to factors such as:

•  the anticipated duration of government's need for the services;

•  the expected economic life of the asset and anticipated timing of major upgrade or refurbishment;

•  the expected technological life of the asset;

•  the minimum term considered necessary to deliver a reasonable return to the private party on its investment and amortise the capital value of the asset such that the asset can be transferred to government without further payment (or, if the private party is to retain the asset, amortise the capital value of the asset to the extent necessary to enable the private party either to make economic alternative use of the asset or abandon it as redundant);

•  the need not to unduly limit government's flexibility in the longer term; and

•  where a concession period is used, the likely length of the design and construction phase.