Performance/price risk

Port Port

Description (What is the Risk)

The risk that the asset is able to achieve the output specification metrics and the price or cost of doing so.
Damage pollution accidents.
Meeting handback requirements
Health and safety vandalism.
Equipment becoming prematurely obsolete.
Expansion.
Supporting infrastructure.
Marine services.
Throughput guarantees.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Private Partner bears the risk of meeting the performance specification.

However, the Contracting Authority is responsible for enforcing the regime and for ensuring that the output specifications are properly tailored to what the Private Partner can deliver. Consideration needs to be given to the ability of the Private Partner to achieve the necessary performance levels, and the appropriateness of metrics given the nature of the project.

Government Support Arrangements (What other government measures may be needed to be taken)

Where certain performance indicators cannot be met due to actions by the Contracting Authority or unforeseen circumstances, the Private Partner may be eligible to seek relief or compensation.

Comparison with Emerging Market

In developed markets, the Contracting Authority should have access to various data sources to develop realistic and attainable performance specifications and models.

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Description (What is the Risk)

The risk that the asset is able to achieve the output specification metrics and the price or cost of doing so.
Damage pollution accidents.
Meeting handback requirements
Health and Safety Vandalism.
Equipment becoming prematurely obsolete.
Expansion.
Supporting infrastructure.
Marine Services.
Throughput guarantees.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Private Partner bears the risk of meeting the performance specification and any throughput guarantees it provides.

The Contracting Authority bears the risk of enforcing the regime and for ensuring that the output specification is properly tailored to what the Private Partner can deliver.

Consideration needs to be given to the ability of the Private Partner to achieve the necessary performance levels given the nature of the project and the emerging market in which it will be based. In particular Private Partners typically want freedom in how they operate the port.

In emerging markets the surrounding hinterland infrastructure (road and rail networks) required to support the project is of particular importance to the Private Partner and will be a retained Contracting Authority risk to the extent that it impacts on the successful implementation of the project.

A failure by the Contracting Authority to upgrade and maintain the supporting infrastructure in a manner which enables it to deal with any increased traffic from the port will impact on the Private Partner's ability to process throughput at the port and will adversely affect berthing times and the efficiency of the project.

Likewise the inability of the Contracting Authority to provide or procure the provision of the required marine services (pilotage, towage, port traffic control) which form the exclusive domain of the port authority will impact on the Private Partner's ability to perform.

Finally the Contracting Authority is required to ensure the efficient provision of the necessary customs control, immigration control and quarantine (human and animal) functions at the port.

Mitigation Measures (What can be done to minimize the risk)

The Private Partner may be able to enter into service level agreements with the relevant Government entities which will be providing the required Governmental services at the port.

A failure by the relevant Government entity to comply with these service level agreements should entitle the Private Partner to relief under the port concession.

The Contracting Authority may also set key performance indicators (eg in relation to the gross number of crane movements per hour or set conservation periods for full, empty or transhipment containers) in relation to the operation of the port.

Government Support Arrangements (What other government measures may be needed to be taken)

Where certain performance indicators cannot be met due to actions by the Contracting Authority or unforeseen circumstances, the Private Partner may be eligible to seek relief or compensation.

The Contracting Authority may be required to upgrade the road or rail network servicing the port.

Comparison with Developed Market

In emerging markets the Contracting Authority's ability to provide the appropriate infrastructure support upgrades presents a particular challenge.



In addition where there the project is in competition with an existing port operated by the port authority there may be issues in the level of service provided to the project by the port authority which would need to be addressed in the project documents.

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