CaseMark Structuring Public Private Partnerships
Designs PPP structures with risk allocation, availability payment mechanisms, and value-for-money analysis for public sponsors.
When To Use
- A public sponsor is evaluating whether to procure an infrastructure project through a PPP versus traditional public procurement
- Structuring the contractual and financial framework for a new PPP concession (transport, social infrastructure, utilities, digital)
- Analyzing or revising risk allocation between public authority, SPV, and private consortium members
- Building or reviewing an availability payment mechanism, demand-risk model, or hybrid revenue structure
- Conducting a value-for-money (VfM) assessment comparing the PPP option to a public sector comparator (PSC)
- Advising on bankability concerns raised by lenders or rating agencies during financial close preparation
Inputs To Gather
- Project description: asset type (road, hospital, school, water treatment, etc.), capacity, location, estimated capex
- Procurement stage: pre-feasibility, outline business case, preferred bidder, or financial close
- Public sector comparator (PSC): raw cost estimate, discount rate, and risk-adjusted figures if available
- Risk register: identified project risks with preliminary allocation (construction, demand, availability, regulatory, force majeure, FX)
- Revenue model preference: availability-based, demand-based, or hybrid; any affordability ceiling set by the public authority
- Concession term: proposed duration and basis for determination (asset life, debt tenor, fiscal constraints)
- Fiscal and legal framework: applicable PPP law or enabling legislation [VERIFY], any sovereign guarantee or viability gap funding constraints
- Lender requirements: target DSCR, debt tenor limits, reserve account expectations, step-in rights expectations
Workflow
Define the PPP model
- Select structure type: DBFOM, DBFM, BOT, concession, availability PPP, or joint venture
- Map the delivery scope — design, build, finance, operate, maintain, transfer — to the chosen model
- Confirm alignment with the jurisdiction's PPP legal framework [VERIFY]
Build the risk allocation matrix
- List all material risks: construction (cost overrun, delay), demand/volume, availability/performance, regulatory change, inflation/FX, force majeure, residual value
- For each risk, assign to the party best able to manage it (public authority, SPV, constructor, operator, insurer)
- Flag risks where allocation is contested or non-standard and note bankability implications
- Document retained risks that remain with the public authority and quantify their expected cost
Design the payment mechanism
- For availability-based PPPs: define the unitary charge, availability standards, performance deduction regime, and payment frequency
- For demand-based concessions: set toll/tariff structure, minimum revenue guarantee (if any), and revenue-sharing thresholds
- For hybrid models: specify the fixed availability component versus the variable demand component and their relative weighting
- Build in adjustment mechanisms for inflation indexation, benchmarking/market testing of soft services, and refinancing gain-share
Conduct value-for-money analysis
- Construct the PSC: base cost + transferable risk value + retained risk value + competitive neutrality adjustments
- Construct the PPP reference model: expected unitary charge stream (or net public cost) discounted at the same rate
- Compare NPV outcomes; sensitivity-test the discount rate, risk valuation, and optimism bias assumptions
- Present qualitative VfM factors: innovation incentives, whole-life costing discipline, output specification flexibility
Assess bankability and fiscal impact
- Verify target DSCR coverage (typically 1.20x–1.40x for availability PPPs [VERIFY]) against the payment mechanism
- Check concession term against asset useful life and debt amortization profile
- Quantify the public authority's contingent liabilities: termination compensation, minimum revenue guarantees, government step-in obligations
- Confirm fiscal treatment — on/off balance sheet under applicable accounting standards (IPSAS 32, ESA 2010, or GASB [VERIFY])
Document the structure
- Produce a structure diagram showing contractual relationships (public authority, SPV, EPC contractor, O&M contractor, lenders, equity investors)
- Compile the risk allocation matrix in tabular form with rationale for each allocation
- Summarize payment mechanism terms, VfM conclusions, and bankability assessment
Output
Deliver a PPP Structuring Report containing:
- Executive summary: recommended PPP model, headline VfM result, and key risk allocation decisions
- Structure diagram: visual map of all contractual parties and fund flows
- Risk allocation matrix: tabular risk-by-risk allocation with rationale and residual public exposure
- Payment mechanism specification: unitary charge formula or tariff structure, deduction regime, indexation, and gain-share terms
- VfM analysis: PSC versus PPP NPV comparison with sensitivity tables
- Bankability assessment: DSCR coverage, debt sizing implications, and lender-flagged issues
- Fiscal impact note: contingent liability quantification and accounting classification
- Key assumptions and limitations: discount rate, risk pricing methodology, data gaps marked with [VERIFY]
Quality Checks
- Risk allocation reflects the "allocate to the party best able to manage" principle — no risk is left unallocated or double-counted
- Payment mechanism deductions are calibrated to incentivize performance without creating a bankability gap (deductions do not erode DSCR below lender minimums)
- PSC and PPP cash flows use the same discount rate, project timeline, and inflation assumptions for a like-for-like comparison
- Concession term is justified by reference to asset life, debt tenor, and equity return expectations — not arbitrary
- All jurisdiction-specific legal requirements, accounting standards, and procurement thresholds are flagged with [VERIFY]
- Contingent liabilities are explicitly quantified — not hidden in qualitative commentary
- Report distinguishes clearly between confirmed data and assumptions/estimates