Key Messages

the risk allocation process. The risk matrix supports the assessment of various opportunities for private sector participation. Planners who complete the risk matrix can better identify funding sources, financial instruments, and other essential elements of an operation concession. The analytical framework is not comprehensive, but it does include references to additional resources and tools. Chapter 6 outlines the risks that merit special attention, while chapters 7 and 8 review how risks are allocated and planned for, which serves as the basis for subsequent analyses and informs the next steps of the preparation stage.

Part III extends deeper into the preparation stage, helping planners polish the project structure stemming from the finalized risk matrix. Chapter 9 outlines examples of various project structures and discusses how risks and functions are allocated in each of them, using the guidance provided in part II. Practitioners may use several risk management strategies to improve their structure. Chapter 10 provides a list of funding and financing mechanisms that may be used to support the identification, analysis, and inclusion of needed instruments in the project structure. reconsidering funding sources and financing mechanisms may result in adjustments to risk reallocation and new mitigation mechanisms.2

Finally, chapter 11 defines the essential elements of an operational concession contract—that is, those elements most critical for achieving project objectives. This chapter does not lay out how to draft a concession contract for operation. However, thinking about how the risk matrix relates to these essential elements may help to correct structural imbalances. By the end of a project’s preparation stage, the essential elements of the concession contract should be aligned with the risk and function allocations.

Once planners have defined a project’s structure, following the steps outlined here and with the aid of other tools, they are ready to enter the structuring phase. PPP transaction advisers will oversee the drafting of bidding and legal documents; refine technical, financial, and legal analyses; and guide the project through the procuring process until financial closure.

Many chapter sections end with references to practical tools and further reading materials. Depending on the nature of the content, chapters include guiding questions to help users process the concepts, templates, and instructions outlined.

The analytical framework is not comprehensive; it is based on relevant case studies and is intended to be used in combination with other tools and references. It does not support all of the activities necessary to undertake project identification and preparation. It is not possible to foresee all possible risks or mitigation strategies. That said, the document points out a good number of them and suggests further reading on how to manage, mitigate, and measure their impact. A substantial literature addresses procurement, contract management, contract development, and other essential guidance relevant to PPPs (see, for example, APMG 2018; PPP Knowledge Lab n.d.; World Bank Group and PPIAF n.d.).

KEY MESSAGES

Given the number of failing urban bus PPPs, the world over, this framework encourages practitioners and planners to think carefully about their specific contexts before adopting this now very popular, yet complex, model.

Planners are encouraged to consider a range of technical solutions that might make a PPP unnecessary. They are also guided in understanding a few key requirements before considering a PPP.

If, after careful analysis, a PPP is considered the best delivery model, the analytical framework provides support in preparing an optimal project structure. Based on case studies from around the world, the document delivers several key messages:

• Safe, clean, and affordable urban public transportation is achievable. It is possible for cities to create sustainable transportation solutions for their growing populations, but doing so requires careful and holistic planning, analysis, and examination of lessons learned from around the world. Critically, the resources required to make a careful plan cost less than unsustainable congestion levels and associated losses in productivity, transportation costs, health, and environmental sustainability. • Sustainable urban transportation systems depend on the appropriate articulation of private sector participation. Private participation in urban transportation services, and bus systems in particular, is popular the world over. But as populations and motorization rates grow, so does transportation demand. even well-planned systems find themselves in trouble and in need of public subsidies. The appropriate allocation of key risks to the private sector can help systems to adjust to changes in demand. • There is no one-size-fits-all solution. Successful urban bus PPPs have included the appropriate technical solutions for the context (taking into consideration the objectives and restrictions of key stakeholders). The optimum technical solution for a particular context in large part depends on the objectives that planners seek to realize. • A PPP is a means of delivering a solution, not a goal or a technical solution in itself or a financing mechanism. Planners should carefully select technical solutions that are suitable to project objectives, given the context, without setting limits based on the delivery mode (for example, a PPP). In some cases, to accommodate a PPP, planners’ objectives have shifted from improving urban bus services overall to simply saving costs or achieving greater efficiency. While these more modest goals are indeed worthwhile, the goals should influence the delivery mode—not the other way around. • Urban bus projects have specific features that make structuring a PPP and achieving bankability more challenging than for other infrastructure-related projects. urban bus transactions are usually relatively smaller than those in other sectors. Given their nature (numerous modular components and the need to integrate technical definitions with risk and function allocations), urban bus projects are more complex to structure, and the existence of incumbent operators with different features may elevate the risks and transaction costs in the eyes of potential investors. • The financial instruments of multilateral development banks can help urban bus

PPPs to achieve financial closure. Such instruments, including partial guarantees, can help to mitigate the effects of high perceived risk. Similarly, multilateral development banks (MDBs) can finance government contributions to cover the viability funding gap of socially profitable projects. Also, MDBs’ participation includes technical assistance that supports project structuring, the achievement of development objectives, and the management of social and environmental risks.