CP3P Core Concepts and Principles 4

Question 1

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

Accepted Answer

Finance

Answer

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

Question 2

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

Accepted Answer

Design-Build (DB)

Answer

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

Question 3

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

Accepted Answer

The private partner retains ownership

Answer

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

Question 4

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

Accepted Answer

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

Answer

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

Question 5

What is 'optimism bias' in PPP appraisal?

Accepted Answer

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

Answer

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

CP3P - Public-Private Partnership Certification Practice Test