A concern is often expressed that governments will be left holding the PPP project if the contractor fails or goes bankrupt. In other words, that unanticipated profits go to the private sector but that unanticipated losses are returned to the government.
This can be avoided by ensuring that the contractor or the special purpose vehicle (SPV) is sufficiently capitalised. Complementary devices that should be considered to ensure this include:
• a sizeable performance bond to cover the period between acceptance of a bid and significant capital expenditure by the contractor on the project
• a sizeable performance bond or warranty towards the end of the contract.