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Re-negotiations in PPP Transport Infrastructure - Essay Example

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The paper operates mainly based on research question which can be stated as follows: How an equitable re-negotiation can be achieved which offers good
value to both principal and promoter in transport infrastructure with respect to PPP projects?
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Re-negotiations in PPP Transport Infrastructure
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Re-negotiations in PPP Transport Infrastructure

Download file to see previous pages... The paper tells that there is the tendency of national governments to incorporate the public-private partnerships (PPP) to provide and upgrade infrastructures, as well as public services. Talk of light rails, upgraded electric railway system, mainland road and main highways, as well as port facilities, are just but some of the projects the private sector is getting substantially involved in, conjunction with the public and local authorities to enhance service delivery in the transport system. Majority of these engagements are made effective via a group of diverse companies and contractual concessions. According to Smith the Principal refers to the one responsible for granting a concession and the ultimate owner of the facility after transfer. They are mostly government agencies, or regulate monopolies. On the other hand, the promoter is the organization that is granted the concession to build, own, operate and transfer a facility. In the course of project contractual engagements and project work, the companies and contractual concessions are faced by serious shortcomings calling for renegotiations. According to Estache and Rus, one crucial consideration that is made during the drafting of a concession contract, is that, during all probability of the life of contract, some unpredicted circumstances will arise forcing the parties of the contract to renegotiate. The statement is truly relevant in cases of concession contracts. The logic behind this is due to the long period of the contract, thus making it anticipate all possible contingencies unfeasible for either of the parties. On the same note, unforeseen contingencies also occur as a result of concession contracts for port facilities and relate to expensive fixed assets that are easily removable and redeployed to a different location (Gomez-Ibanez and Meyer 1993). Renegotiations occur in developing and developed countries alike. Gomez-Inbanez and Meyer (1993) analysed transport concessions in industrialised countries and made out that renegotiations are remarkably common. Renegotiation of a concession contract is probably the rule and not the exception, and they should not be perceived as a failure (Peter, Kuyper and Candolle 1995). Due to concession contracts being essentially long-life documents, the parties are not in a position to foresee all possible future contingencies at the moment of the contract drafting. Thereby, this should be noted in advance, and the parties ought to consider several future conflict scenarios and put in place provisions for inclusion of at least basic renegotiations rules. Nevertheless, it is critical for the concessionaire to avoid renegotiation at an early stage as it may place in jeopardy the credibility, transparency, and fairness of the bidding process (Estache and Rus 2000). Contracts are mainly renegotiated within a few years after official contractual signing and results into better contractual terms for the contract holders (promoters). The principle and the promoter are crucial entities in the signing and effectual implementation of the contracts to the project (Smith 2002). This paper aims at evaluating the principle and the promoter in renegotiations regarding public-private partnerships concession contracts, in regard to transport infrastructure. Further, equitable renegotiations are imperative to the realisation of the completion of the project in question. This paper also aims at evaluating how to achieve equitable renegotiations, which offer superb value to both the principle and promoter. The contractual renegotiation is effective in the reduction of contract incompetence; conversely, a poor design of these can allow for opportunistic behavior by the concessionaries. Thus, there is ...Download file to see next pagesRead More
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