Core Concepts and Principles Flashcards

In a DBFOM contract, what does the 'F' signify?

Answer: Finance

DBFOM stands for Design-Build-Finance-Operate-Maintain, with the private partner raising project finance.

Which contract type transfers the least lifecycle responsibility to the private sector?

Answer: Design-Build (DB)

Design-Build covers only design and construction, leaving finance, operation, and maintenance with the public sector.

Under a Build-Own-Operate (BOO) arrangement, what typically happens to the asset at the end of the contract?

Answer: The private partner retains ownership

In BOO, the private party owns the asset indefinitely and there is usually no transfer obligation, unlike BOT.

Payment deductions in an availability-based PPP are primarily designed to:

Answer: Incentivize performance by reducing payments when availability or service standards are not met

Deductions link payment to performance, giving the private partner a financial incentive to meet service standards.

What is 'optimism bias' in PPP appraisal?

Answer: The tendency to underestimate project costs and durations, often adjusted for in the PSC

Optimism bias is the systematic tendency to underestimate costs and timelines; appraisals apply uplifts to correct it.

Which risk is usually best retained by the public sector?

Answer: Changes in law that specifically target the project or PPP sector

Discriminatory change in law is within government control, so the public sector typically retains it.

A 'handback' provision in a PPP contract ensures that:

Answer: The asset is returned to the public sector in a specified condition at contract expiry

Handback requirements set the condition the asset must be in at expiry, often backed by inspections and retention funds.