The Civil Engineering Contractor October 2018 | Page 7

The 7th Construction Management Summit hosted by SACPCMP.
project development funding to fund each and every feasibility study, depending
on the project, its size, and complexity. We also provide project management and
dispute resolution services as and when needed,” says Maganedisa.
The all-important docs
Most importantly for contractors, there is the PPP Agreements and its schedules,
which the PPP Unit expects them to submit during the bidding stage, “and we
commonly find that some of these are either not there or not in sufficient detail for
us to make a decision,” says Maganedisa:
• Funding agreement, which covers the loan that the private party is taking out on
behalf of government. This must clearly spell out who has taken out the loan,
how much it is, what the repayment regime will be and if there is a default as
to who takes the first hit and how is it managed.
• Finance document showing how bidders have satisfied the lender as to their
bankability and capability to repay the amount. “Most of our contractors come
up short in this agreement, based on previous amounts they’ve borrowed. The
government guarantees the contract but does not guarantee the loan portion,
so bidders need to be able to demonstrate to the lender that they have security
to back their borrowings,” says Maganedisa.
• Shareholder agreements so government knows how the consortium is formed,
drawdowns, share allocations, and dividend policy. Some of these agreements
show that the form of the relationships is not a consortium but in fact that of a
subcontractor, he says.
• Design and construction subcontractor: “When we get to this agreement, we
find that most companies’ applications are often not detailed enough but just a
boilerplate without annexures. This suggests they have not engaged sufficiently
with the parties, but propose to do so only once they have won the contract.
However, operational matters such as this are what we base our decision on,
and these details are where contractors can score well.”
• Interface agreements: these outline the nature of interaction between the
various parties to a consortium, and how they will resolve problems. Treasury
needs to know that in the event of a crisis, this consortium will be able to
resolve it.
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