The Contracting Authority should bear in mind that in a corporate financed structure involving only one sponsor group, poor performance may not realistically be able to be addressed in the same way as it can be in a structure where more than one corporate group is involved, as well as possibly third party lenders. There will be a different dynamic without parties who would insist on contractual arrangements being put in place to enable a poorly performing sub-contractor (and/or Private Partner) to be replaced before the PPP Contract is terminated (e.g. as would be the case in a typical project financing). Similarly, Direct Agreements with sub-contractors are unlikely to be of much benefit if the whole PPP Contract is essentially being delivered by one corporate group and failure to perform is likely to be indicative of a systemic failure within the group as a whole.
As there are no third party lenders, there will be no Direct Agreement either (see Section 6, Lenders' Step-in Rights). While this means the Contracting Authority has fewer constraints on its ability to terminate the PPP Contract in default circumstances, the lack of third party lender involvement removes one line of defense to rescue a PPP Project in trouble.
The Contracting Authority should consider what alternative protection to seek in these circumstances - e.g. requiring certain guarantees or payment retention rights, direct rights against key suppliers or rights to appoint third parties to remedy defaults at the cost and risk of the Private Partner.