Given conflicts of interest, it makes sense to separate the awarding function from supervising function in PPP policy frameworks. The agency that grants the concessions should not be the same as the agency that supervises the implementation of contracts. Experience suggests that the incentives for contract renegotiation have been greater in cases where the same agency performs both functions. Contract renegotiations are, in some cases, a consequence of omissions or mistakes made by the agency that granted the concessions. When that agency is also in charge of supervision, it would tend to avoid escalating the conflict with the concessionary company and be thus more inclined to yield to renegotiation pressures.
The supervisory agency needs to have the authority to supervise and to impose significant pecuniary sanctions on the concessionary company in cases of breach of contract. This is an additional reason to allow as bidders only concessionary companies with a sound capital base that they will defend by avoiding, to the extent possible, breaches of contractual agreements.
It is also essential that PPP frameworks put in place an efficient mechanism for dispute resolution. Disputes between the concessionary company and the government may arise due to different views on the nature and extent or risk sharing. They may also arise when unforeseen changes in technology lead to an early termination of the contract that calls for fair compensation to the concessionary company. In addition, contracts may not have provisions to resolve all types of differences. A credible an efficient conflict resolution is thus needed.
Note that avoiding Sins #4 and #5 goes a long way into fending off Sins #1 and #2. In effect, seizing the opportunities for market tests, on the one hand, and ensuring proper due diligence, checks and balances, and accountability in the process of screening, awarding and monitoring risk sharing structures, on the other hand, is not realistic in the absence of an appropriate organizational structure, composed of highly professional but separate governmental agencies for awarding and supervising PPPs, alongside a sound dispute resolution mechanism.