The document discusses due diligence considerations for public-private partnership (PPP) projects. It outlines common reasons for PPP project failure such as lack of government expertise and poor communication. It emphasizes the importance of conducting due diligence on the project itself and potential private sector partners. This includes evaluating the partners' experience, finances, ownership structure, and any legal or ethical issues. The document also stresses managing political risks and ensuring open communication between all stakeholder groups involved in PPP projects.

1. Due Diligence in PPP Projects
Project made possible through funding by:
Lindsey Scannell, CLDP
OECD Southeast Asia Regional Programme
Manila, Philippines
26 April 2022

2. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE U.S. Department of Commerce | CLDP
About the Commercial Law Development
Program (CLDP)
• Mission: Improve the legal environment for business worldwide
- Established in 1992
- Provides legal technical assistance on behalf of the U.S. Department of Commerce
• What we do: CLDP partners with developing and post-conflict countries to implement commercial
legal reforms that support U.S. foreign policy goals.
- Government-to-government technical assistance helps host countries:
1) Modernize their commercial legal environments
2) Support their economic development
• CLDP’s Asia-Pacific Team:
- Advises policymakers and government officials to develop transparent legal and procedural
frameworks to oversee complex infrastructure projects.

3. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE U.S. Department of Commerce | CLDP
CLDP Programs in Asia-Pacific
• Bangladesh, Nepal, and the Maldives—PPP
project life cycle & critical documents
• Indonesia—Municipal & Sukuk Bond Issuance
• Timor-Leste—Carbon Capture & Storage
• PPP Webinar Series & Animated Shorts
• Project Finance
• PPP Screening Tools
• Business Case Development
• Contract Management
• Infrastructure Contract Legal Certificate
Program (In Production)

4. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE U.S. Department of Commerce | CLDP
Topics for Consideration Today
• Common Reasons For Project Failure
• Due Diligence Considerations
• Political Considerations
• Inter-Stakeholder Communications

5. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE U.S. Department of Commerce | CLDP
Common Reasons for Project Failure
• Lack of Government expertise, experience, or bandwidth in
developing projects.
• Change in Government or political party.
• Poor communication during project identification, preparation, and
procurement.
• Not picking an appropriate project structure.
• Not appropriately assigning project risk.
• Lack of clear mandate or political will for the project.

6. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE U.S. Department of Commerce | CLDP
Definition of Public-Private Partnership
• Public Private Partnerships or PPPs are a contractual method
for procuring and delivering public assets and public services
• Public Assets:
• Railroads
• Prisons
• Schools
• Hospitals
• Public Service:
• Education
• Emergency Services
• Security
• Public Transportation

7. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE U.S. Department of Commerce | CLDP
How does a PPP work:
Road Project Illustration
Conventional
PPP - Availability
Payments
PPP - User Fee
Payments
Planning approval risk /
land acquisition
public public public
Construction risk public private private
Operations and
Maintenance risk
public private private
Demand / revenue risk public public private
Financial risk public private private
Regulatory risk public shared shared
Force Majeure public shared shared

8. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE U.S. Department of Commerce | CLDP
Due Diligence Considerations
• Project Due Diligence
• Begins with project identification and selection
• Feasibility Studies are an integral part
• Value for Money analysis tests whether the project structure is the
best option.
• Private Sector Partner/Developer Due Diligence
• Does the Private Sector Partner have the necessary experience?
• Does the Private Sector Partner have the financial stability or
backing to complete the project?
• Is the Private Partner, their parent company, or subsidiaries
suspended or debarred by the country’s procurement agency?

9. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE U.S. Department of Commerce | CLDP
Due Diligence Considerations
• Vetting the Private Partner or Developer
• Avoid conflicts of interest
• Avoid political embarrassment
• Having established vetting rules for the whole government helps ensure
the credibility and neutrality of the individual government officials and
agencies.
• Vetting should include:
• Any ethical issues with the private partner
• Any legal issues encountered with the private partner
• Any successes experienced with the private partner

10. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE U.S. Department of Commerce | CLDP
Due Diligence Considerations
• Vet all key participants in prospective development team, not just the
developer
• Consider each organization’s history, ownership & corporate structure
• Does private partner own intellectual property they claim to own?
• Are there any aspects of private partner that may violate existing
ministry/agency agreements?

11. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE U.S. Department of Commerce | CLDP
Due Diligence Considerations
• Private Sector Partner Experience
• What experience do they have with the type of project at issue?
• What experience do they have in managing public dialogue?
• Are there sufficient local members on development
team to assure local expertise?

12. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE U.S. Department of Commerce | CLDP
Due Diligence Considerations
• Private Sector Partner Finances
• How financially stable is the private partner?
• What other pending bids do private partners have?
• Will they affect ability of partners to fully perform?
• Is partner willing to produce internal cost audit reports/can you
access other government audits?
• How does partner treat direct & indirect costs for billing purposes?
• Any issues with compliance with reporting laws/dishonest practices?

13. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE U.S. Department of Commerce | CLDP
Political Considerations
• Politics can either smooth the way for a project or doom it.
• The project champion is perhaps most important component of success
• Must be person of high integrity
• Election cycle should not occur during project procurement & negotiation
• Project champion needs to advocate for project
• Messaging of the project is critical
• Political support should not have any influence over the choice of private
partner.

14. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE U.S. Department of Commerce | CLDP
Political Risks
• Public opinion/political opposition
• Turnover of commission members/elected officials
• Internal resistance
• Obtaining all necessary regulatory approvals
• Transparency & accountability
• Avoiding scandal is critical
• Transparency with the general public
• Progress
• Money spent
• Ultimate long-term costs

15. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE U.S. Department of Commerce | CLDP
Inter-Stakeholder Communications
• Need to engage all affected ministries/agencies directly in
project implementation:
• Participation begins during project selection process and
can run through operations
• Transparency & encouraging input and thoughts are critical
• Can affect design decisions and operations
• Consider whether they should participate on project
oversight panels through construction and/or operations

16. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE U.S. Department of Commerce | CLDP
Inter-Stakeholder Communication
Strategy
• Identification of all interest groups for communication to be directed;
• Explanation of the main concepts to be communicated - basic
elements, project outcomes, the need it meets, and the people it
serves;
• The identification of the media used to reach the groups identified;
• The main characteristics of the communication pieces, preferably
specific to each group identified;
• The identification of the people inside the project team to consider as
the prime source of information for the general public;
• Basic strategy for maintaining good relationships with the press.

17. Tel: +1 202 482 2400 www.cldp.doc.gov
1401 Constitution Avenue,
NW, Washington,
DC 20230
Lindsey Scannell
Senior Counsel
Asia-Pacific Portfolio
Lscannell@doc.gov
CLDP PPP Resource Library
www.cldp.doc.gov/PPP