Implementation – Negotiation & Contracting
17.5 What are the key issues to keep in mind?
The municipal officers and the PPP task force need to be aware
of the following summary of issues. These factors are dealt
with in more detail in [Toolkits 15, 16 and
- Commencement of works
The private partner is expected to commence
the PPP works agreed to as soon as is reasonably possible.
Commencement is the start of the period during which the
contract is to be in force. Therefore, a late start by
the private partner may affect profitability.
- Kick-off meetings
Prior to the private sector beginning any works agreed
under the contract, a kick-off meeting should take place
between all stakeholders to the contract. The purpose of
the meeting is to introduce staff, clarify organisation
and agree on lines of control and communication as well
as to set administrative routines.
- Subsequent meetings
Subsequent meetings among the stakeholders are necessary
in order to record events, discuss problems and decide
on matters. These could be held at set times – for
Since the poor are important stakeholders, it
is important for the partners to the PPP to hear their
voice through community representatives. It is crucial to maintain
community involvement at all stages and to pay particular
attention to the needs of the poor during the stages of
negotiating and debating; where there is little such involvement
financial and economical reasoning may well suppress the voice of
the poor. It is the wellbeing of those on low incomes that is
the goal of the pro-poor PPP project after all.
- Supervision documents and records
Good record keeping and documentation are essential to
monitor and control the PPP contract.
- Compliance with specifications
There is a need to monitor the operations of the private
partner continuously to ensure compliance with set targets.
International Federation of Consulting Engineers (FIDIC)
requirements for quality control may be used where construction
projects are involved.
- Communication with the private sector
- Measurement and valuation of work
Honest and transparent feedback from consumers is an
important measure of the work carried out by the private
- Variations to the contract
Licences and contracts
There are two categories of contracts.
…are designed to be enforced by court ordering and need to
be used if an urban government is involved.
…rely on self-enforcement or “private ordering”.
This leads to the following options:
A verbal contract…
… generally the mode in the informal sector, but also common
in formal sector sub-contracting.
– If specified, there is a mutual verbal agreement between the stakeholders.
– If unspecified, there is no specific verbal agreement, but an
understanding exists between the stakeholders as to their expected roles.
Written informal contracts…
…a simple legal contract.
Written formal contracts…
…typified by the standard contracts used by urban government in the tender
contract method of procurement. Non-standard conditions may be tailored
to the requirements of the different stakeholders.
Whether legal or relational contracts are used, it is important
to ensure clarity with respect to roles and responsibilities.
Are the contractors literate or do they have access to somebody
reliable and trusted who could read and translate the documents?
If yes, a written contract could be used; if no, contract conditions
must be specified verbally.
Are the potential contractors used to working with any particular
type of contract? If yes, consider building on the practices
that already exist.
Is the contract likely to be enforced by court ordering? If
no, an informal contract could be adopted; if yes, either
legal assistance may be required or – in the case of urban government – standard
contracts and conditions can be used.
A possible solution to tackle the lack of capacity on the
side of the public sector could be capacity development [Tool
21]. An alternative solution is to involve consultants.
Ideally, a good balance should be found between training municipal
officials and employing experts to do very specific tasks,
such as financial analysis or preparation of contract documentation.
<– A strategy linked into an overall municipal
<– Explicit reference to the approach to be taken
towards the poor
Some prescriptions can be made for effective and principled
- separate people from the problem;
- focus on interests, not positions (interests are the overriding
– why someone wants something; issues are agenda items – what
a person wants; position is the person’s focus or stance
on the issue);
- generate a variety of possibilities before deciding what to
- insist that the results be based on some objective standard;
- respect the other side’s dignity and authority;
- remember that the other party probably has a different view
on disclosure of information;
- avoid misunderstandings by summarising key points and issues;
- nothing is agreed until everything is agreed;
- listen carefully;
- do not concede, trade; and
- use traded movement to close the deal.