Implementation – Negotiation & Contracting
17.2 What is the process of contracting?
A contract is a legal agreement between two or more parties where
one party (the contractor, in this case the private sector)
agrees to carry out certain tasks in return for a reward (or in
legal terms, a consideration) paid by a party (the users of the
service). The process of contracting is therefore a series of interactions
between the stakeholders to a PPP contract; this in turn leads
to the execution of the contract (delivery of the required
services). Negotiation characterises all stages of the contracting
The rights, responsibilities and obligations of each stakeholder
(the private sector and the municipality) fall into two categories.
- There are specific duties and obligations required by
the contract; these are set out in the contract documents.
- Then there are general legal requirements – the
laws of the country concerned.
It should be stressed that the principal objective of the
contract is the successful completion of the tasks identified,
for which each party is making a contribution (either in
cash or kind). Ideally, the contract must be executed with
the least possible trouble and to the highest standard
possible within the provisions of the contract. This can
only be achieved if all parties involved in the PPP aim to
work together – not
against each other, as is the case on occasions. Therefore
cooperation, despite differences of opinion and personality,
The process of contracting in a PPP involves the following
- the pre-bidding phase;
- the procurement phase; and
- the operation phase.
The contractual issues that need to be tackled at each
phase of the PPP are discussed in the following section.