A guidebook on public-private partnership in infrastructure

J. TERMS OF CONTRACT 
Several parties are involved in the implementation of a PPP project. They 
include government agencies, project sponsor(s), banks and other financial 
institutions, experts, suppliers, off-taker(s) and third parties. A special project 
company called SPV may also be established for the purpose of project 
implementation and its operation. The details of implementation and payment 
arrangements are negotiated between the parties involved and are documented in a 
number of written agreements signed by them.
If an SPV is established, it is at the centre of most such agreements. The SPV 
negotiates the agreements with the other parties involved in the process. If the 
establishment of an SPV is not required, the concessionaire (or the private project 
company which sponsors the project) is at the centre of such agreements and 
negotiates the contract agreements with the other parties including the government 
involved in the process. 
Figure 3 shows the nature and the general order of execution of agreements 
between different parties. The contract agreement with the government forms the 
basis for subsequent agreements with other parties.
Figure 3. Agreements in a typical PPP arrangement 

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A Guidebook on Public-Private Partnership in Infrastructure 
55 
 

A concession/contract agreement is the only agreement that is unique to PPP 

projects. The agreement: 
• Underpins the whole structure of a PPP transaction; 
• Defines the relationship between the public sector and the private sector;
• Identifies and allocates vital risks in a project; and 
• Represents an important part of the security documents for the lenders.
Other agreements are analogous in form and content to agreements found in 
other corporate or commercial transactions. 
It may be mentioned here that all types of agreements shown in 
figure 3 may not be necessary for all projects, for example, an off-take agreement in 
case of a toll road. An off-take agreement may not also be necessary for all power 
projects. 
Contract agreements in respect of a project between the contracting authority 
in government and the private project company may be contained in a single 
document or may consist of more than one separate documents. It is difficult to 
generalize possible contents of all such agreements as they vary due to difference in 
legal and regulatory provisions from one country to another, type of PPP model and 
the nature of involvement of the public sector, implementation arrangements 
(including financial matters), operational, and various sector specific resource 
utilisation, technological and other matters. There are, however, certain key 
elements that need to be covered in most contract agreements. These key elements 
are discussed in Chapter 5.