4.20 Guidance material can offer a number of benefits, including more rapidly diffusing good practices and lowering transactions costs. The standardization of contract clauses can help reduce both the complexity of PPP arrangements and project preparation costs. A number of practitioners in India have also argued that the lack of standard contracts or standard clauses that are approved by the center makes bureaucrats more reluctant to sign off on PPP deals.
4.21 Another possible role for the center would therefore be to develop guidance materials to support the development and implementation of PPPs. This could cover issues related to contract design, procedures for identifying, procuring and managing PPPs, and even model PPP legislation.7 It could also cover short guidance notes on focused topics of interest. Such notes could be a helpful complement to case studies, allowing for the discussion of nuances and recommendations for differing local contexts.8
4.22 Model contract clauses, template contracts, guidelines and process-related tools have however already been developed to varying degrees by some states and central entities. One option would be to rely on a more natural diffusion of these approaches with states copying other approaches held to be successful. Although there are examples from international practice of detailed guidance being provided by the national government - such as in South Africa, for example - in a number of other countries (for example Canada and Australia), the center provides no guidance to sub-national governments. There are also risks that centrally sponsored model contracts can reduce the needed room for flexibility and innovation even where these models are advisory and not mandatory.
4.23 Despite these concerns, a central effort to produce guidance material clauses could lead to the more rapid adoption of good practice approaches by states, reducing learning and transactions costs for private companies and their advisors. This is probably true in most countries, but will likely be as applicable, if not more so, in India where the mechanisms for sharing information and experiences are still limited. Some of the risks associated with guidance being seen as mandatory could be addressed by having guidance indicate a range of options wherever appropriate - for example different options for using particular formulations for contractual clauses, or processes or methodologies for estimating affordability to the government or value-for-money of a PPP.
4.24 This relatively limited role could be led by a single central agency, though would benefit from input and oversight from a public-private advisory group to guide where this central effort could add most value, and what types of materials are most needed. On the public sector side, this should contain representatives from state governments as well as the center. Much of the actual preparation of material should be contracted out to consultants experienced in the field.
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7 Model contract clauses -for instance for force majeure, refinancing, termination and dispute resolution- can help inject international or national best practice, and avoid each contract re-inventing the wheel. Process-related guidance could concern step-by-step directions on how to undertake a variety of the tasks required for project preparation, provider selection and contract management, such as how to appoint and manage transaction advisers to the contracting authority, how to prepare an initial business case (demonstrating affordability & market appetite, and the tradeoffs in choosing between traditional procurement and the variety of PPP options), how to construct a public sector comparator (a benchmark on which to judge the value for money of bids), how to prepare a value for money report (and clarifying the extent of risk transfer), how to undertake stakeholder consultations, and how to conduct independent auditing of projects.
8 Some of the possible topics that have been suggested as being relevant in India are: how to reduce time from pre-feasibility to contract award; benefits of concurrent project review by government entities; why it may be better to award part-success fee to advisers at financial close; how to design an effective first-step pre-arbitration dispute resolution; and why a state may benefit from a dedicated PPP unit and how to set one up.