2.2.13 Generally, financial experts in the PPP project teams should have a good understanding of project financing, including an understanding of the different financial markets and financial instruments that can provide financing for the PPP project.
2.2.14 For the public sector, such financial competencies will help public agencies identify the likely financiers of the PPP project and their risk attitudes, so as to structure the PPP contract (e.g. including step-in rights, termination clauses and payment mechanisms) that are acceptable to the private financiers. Without a good understanding of the financing aspects of the project, the public sector might end up structuring a PPP contract where the PPP providers can only secure financing at expensive borrowing rates, thereby leading to higher contract cost to the public agency.
2.2.15 For the private sector bidders, a good understanding of project financing and financial markets will help them identify suitable sources of financing to meet the public sector's requirements at the lowest cost.
2.2.16 In general, financial experts on the project teams should be able to:
a) Build up a robust business case for the PPP project;
b) Identify the responsibilities and risks borne by the public sector and the private sector and the financial implications of such responsibilities;
c) Structure payment mechanisms that offer the optimum balance of responsibilities, risks and rewards for the public agency and PPP provider;
d) Prepare/Review tender proposals. The private sector will have to prepare and submit tender proposals detailing the business model and the financial costs to the public agency. The public agency's team will assess the accuracy of the financial models and the implications on the cost for the public agency; and
e) Identify the financial implications of the contract clauses in the PPP contract, e.g. implications of step-in rights and termination clauses.