Introduction - Investing into North African Solar Power - page 18

1.3.7 Advantages of PPPs and Solutions to Problems

Despite the negative aspects of PPP usage, there are also benefits. Initially, it is
helpful to establish Public Sector Comparators (PSC) to determine whether the
market is suitable for a PPP, or whether another form of cooperation will lead to a
better VFM. 153 A PSC is an estimate of the project

s cost assuming it had been
performed by conventional public procurement. 154 If a PPP is best, the advantage is
that the private operator undertakes most of the capital expenses, such as the design,
building, financing and operating costs. 155 Although a special PPP framework is not
necessary for the “smooth running” of a PPP, it is useful to have a clear and
comprehensive legal framework. 156 It is very important that both parties accept
that a PPP cannot regulate every possible event. To avoid inflexibility, it is
necessary to include renegotiation or adjustment clauses. 157
There is no doubt that there is chance of creating a monopoly. Time limited
contracts such as concessions can help to prevent this. The contract should include
certain provisions pertaining to the government

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s ability to check the costs relative
to the prices, and to adjust the price if necessary. 158 It is beneficial to involve the
private sector because it is better able to operate and administer a large scale
project. 159 Increased efficiency may have a negative effect on the service, which
means that it essential to choose the correct partner and to include a

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no service/no

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agreement in order to facilitate PPPs. 160 Furthermore, a contract should
include sections dealing with the issue of a change of control, for example in the
event of a shareholder replacement. 161
To avoid off-balance-sheet treatment, it would be best to be as transparent as
possible from the beginning. 162 PPPs can help states with budget constraints,
because they are not bearing the costs (and some of the risks) and are thus not

pay

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153 Becher ( 2007 ), 55 (56); Alfen/Fischer in Weber et al. ( 2006 ), 19-20; Stocker ( 2010 ), 96;
Roquette/Butcher in Roquette and Otto ( 2005 ), F. Public-Private Partnership III para 18.
154 Yescombe ( 2007 ), 62-64.
155 Fourie and Burger ( 2001 ), 147 (150).
156 Corbacho and Schwartz ( 2008 ), 85 (93); To date, several countries operate PPP task forces, in
Stocker ( 2010 ), 96; PPP task forces, in: Roquette/Butcher in Roquette and Otto ( 2005 ), F. Public-
Private Partnership III paras 27-29.
157

Hard to distinguish between renegotiation and adjustment clauses, however adjustment clauses
frequently deal with change of law and renegotiation clauses with modification of the contractual
framework, in: Griebel ( 2008 ), 33-34; Metje ( 2008 ), 126-127; These clause must respect the
principle of pacta sunt servanda , in: Berger ( 2003 ), 65 (71) and (92-93).
158

Establishing a independent consortium, in: Koman ( 2004 ).

159

Christiansen ( 2008 ), 143 (148); Diederichs ( 2009 ), 547 (548); cf. DIHK and bfai ( 2006 ), 12.
160 EIB ( 2004 ); Corbacho and Schwartz ( 2008 ), 85 (93); Bonus-penalty contract, in: Werner and
Fiedler ( 2007 ), 91 (98).
161 Kn¨ tel in Siebel et al. ( 2008 ), para 1314.
162 Deutscher Bundestag ( 2005 ), 10; Corbacho and Schwartz ( 2008 ), 85 (93); Transparency and
concessions, in: Karl ( 2003 ), 37 (48-49); Koman ( 2004 ).