Penalty mechanisms for enforcing concessionaire performance in public–private partnership contracts in Nigeria

Abstract

Purpose The purpose of this study is to develop penalty measures against concessionaires’ defaults as a mechanism for protecting the interests of parties (public and private) in public–private partnership (PPP) contracts for enhancing project delivery. Design/methodology/approach The research methodology is a mixed qualitative and quantitative approach. This study commenced with an in-depth literature review, which provided the basis for identification of penalty measures in construction contract management. The qualitative assessment was based on semi-structured face-to-face interviews, which were aimed at identifying the underlying pattern of the penalty measures, and the quantitative assessment was based on a structured questionnaire. In both cases, respondents were stakeholders’ organizations that had been involved in PPP contracts in the southwestern region of Nigeria. These include industrial practitioners from government-based organizations (ministries, agencies, corporations/parastatals, etc.), private developers/concessionaires, law firms, banks, etc. The sample size was selected using a respondent-driven sampling approach, as the comprehensive lists of the participants in PPP contracts are not readily available in the Nigerian construction industry. Responses from the interview were analysed using interpretative phenomenal analysis via ATLAS.ti7. The quantitative data were analysed using percentile for flexibility between “most” and “more” preferred mechanisms. Findings This study developed mechanisms that defined the rights of the public party to redress underperformance of PPP contracts consequent to the defaults of the private party. “Step-in-right” and “termination of the contracts” were preferred against specific cases of “delayed execution”, “abandonment of the project”, “bankruptcy of the concessionaire” and “non-compliance with design and specifications”. With respect to “shortfall in performance against established dates”, the results converged on “monetary fine” and diverged on “step-in-right” and “termination of the contracts”. Practical implications The study contributes to literature on mechanisms for enforcing PPP project performance. Besides, defining rights and obligations of the parties in specific events of underperformance of the concessionaires in PPP contracts is a significant step towards the development of standard conditions of contract for managing PPP projects in which the model is being newly adopted. Originality/value Project management studies on PPP were extended by defining the liabilities that are consequent to the defaults of the private party and the mechanisms for their enforcement.

Critical performance factors of public sector organizations in concession-based public-private partnership projects

“…Besides, Eaton et al (2007) identified mature legal regime and stable political environment as cross-cultural features which would inform successful delivery of PPP projects. However, a mechanism that had been sought by concessionaires is to demand for a concession agreement to be signed by the parties (the concessionaire and the government) in Nigeria and sealed by a court in any foreign stakeholder's country (Opawole, 2018). For example, the Lekki Concession Company signed the Lekki-Epe Road project under the Nigerian law and demanded the deal to be sealed by a court in Europe.…”

“…Moreover, the fact that some private investors find it difficult to recoup their investments on some projects had made them to seek compensations in form of financial claims on the PSOs. For example, the public sector organization agreed to pay financial compensations to the private party pending the problem of toll payment was resolved in the case of Lekki-Epe Road projects (Opawole, 2018). These additional obligations to the government were resisted as contradicting concession philosophy.…”

Risk factors associated with procuring university hostel facilities through build-operate-transfer model

“…Moreover, the approach towards implementing risk transfer in respect of unforeseen ground conditions, force majeure and inclement weather could be through insurance cover (Kerf et al, 1998;Singh and Kalidindi, 2009). It would also be possible for the developer to implement risk transfer in mitigating risk factors such as force majeure, inclement weather, change in relevant government regulation and variation of interest rate through the instrument of compensations (Opawole, 2018). Risk transfer in respect of change in relevant government regulation, variation of interest rate would be implemented through seeking subsidies, incentives and tax exemptions/reductions from the public sector organization (Al-shareem et al, 2015).…”

Evaluating the key risk factors in PPP-procured mass housing projects in Nigeria: a Delphi study of industry experts

“…Therefore, risk is involved irrespective of the procurement option adopted for the delivery of construction projects. The Nigerian Government recently adopted public-private partnership (PPP) in the procurement of mass housing projects (MHPs) in the country because the government who had been the sole provider of the scheme do not have the needed fund owing to dwindling budgetary allocation had to seek the support of the organised private sector (OPS) through the PPP initiatives (Ibem et al , 2014; Adeogun and Taiwo, 2011; Owusu-Manu et al , 2020; Opawole, 2018). PPP mass housing evolution and experience started in the year 2000 which allow the OPS to be fully involved in the provision of housing in Nigeria and the government role becomes that of the enabler and regulator rather than being the provider.…”