Journal of Place Management and Development

Benchmarking parties’ obligations in the execution of concession-based PPP

projects in Nigeria
Akintayo Opawole Godwin Onajite Jagboro
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Akintayo Opawole Godwin Onajite Jagboro , (2016),"Benchmarking parties’ obligations in the
execution of concession-based PPP projects in Nigeria", Journal of Place Management and
Development, Vol. 9 Iss 1 pp. 27 - 46
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Benchmarking parties’ Concession-

based PPP
obligations in the execution of projects in
Nigeria
concession-based PPP projects
in Nigeria 27
Akintayo Opawole and Godwin Onajite Jagboro Received 17 August 2015
Revised 13 January 2016
Department of Quantity Surveying, Obafemi Awolowo University, Accepted 2 February 2016
Ile-Ife, Nigeria
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Abstract
Purpose – Demand–supply matrices with adverse consequences has occasioned government
response to concession initiatives in infrastructure in Nigeria. However, concession-based projects have
been trailed by administrative and legal controversies. While this scenario has negatively impacted the
acceptability of a concession contract, there is, nevertheless, a paucity of research effort aimed at
developing a sustainable framework. The purpose of this paper is to develop a conceptual framework
for the evaluation and allocation of obligations of parties, thereby enhancing the synergy and
cooperation between the public and private sector organization.
Design/methodology/approach – Data were obtained through a questionnaire administered to
professionals in concession-based contracts in southwestern Nigeria, which included architects, estate
surveyors, quantity surveyors, engineers and builders, accountants/bankers/economists and lawyers.
The respondents were selected using random and respondent driven sampling approaches. The
questions were structured to ensure that the respondents have appropriate experience in
concession-based projects and hold appropriate positions as decision-makers so as to give credence to
the collected data.
Findings – The study identified 47 contractual obligations in the specific context of developing
countries. Based on “half-adjusting principle”, 13 of the obligations notably cost of land acquisition and
cost of social disturbances were allocated to the public party; 18 of the obligations notably project design
and cost of feasibility study were allocated to the private party; and 16 of the obligations including
preparation of terms of a contract and relocation of third party facilities were shared by the parties.
Originality/value – The framework benchmarked the categorization of public and private parties’
obligations in concession-based public–private partnership (PPP) contracts. The study has the
implication for the evaluation and allocation of obligations of parties, which could mitigate the risk of
failure of PPP projects in relation to the specific context of developing countries.
Keywords Infrastructure, Concession, Obligations, Public party, Private party
Paper type Research paper

Introduction
Concession-based projects constitute a segment of infrastructure that is of high capital
outlay, essentially procured through partnership. The arrangement is usually between
Journal of Place Management and
the public sector organizations and private investors (often referred to as parties, Development
Akbiyikli, 2013) for the purpose of designing, planning, financing, constructing, Vol. 9 No. 1, 2016
pp. 27-46
providing and/or operating infrastructure facilities or related services (Harris, 2003). © Emerald Group Publishing Limited
1753-8335
Infrastructure development through concession is much supported to have originated DOI 10.1108/JPMD-08-2015-0029
 JPMD from the UK in 1992, though similar models were argued to have been experimented in
9,1 other countries and in the UK before this time (Kerf et al., 1998; Ohia, 2011; Akbiyikli,
2013). In a concession arrangement, project design, construction, financing and
operation rests mainly with the private sector over a pre-determined period of 25 to 30
years (Akintoye et al., 2003; Li et al., 2005). Recently, the concept of concession has
attracted worldwide attention and acquired a new resonance in the context of
28 developing countries as an innovative policy tool for remedying the lack of dynamism in
traditional public infrastructure delivery system (Jamali, 2004). Nigeria, according to
Global Legal Group (2007) and Ohia (2011), would require about N30 trillion invested at
$12b to $15b (N2.4 trillion to N3.0 trillion) annually for the next 10 years to meet the
satisfactory infrastructure requirements of the economy. Given the constraints on the
public budget, it is evident that governments alone cannot muster the resources to meet
this need, thus making private sector investment highly desirable.
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Until 2006, when the first set of concession-based projects were launched in Nigeria,
infrastructure development in the country was dependent significantly on the public
financing models. The poor performance of the budgetary model had, therefore, left the
country with deep infrastructure demand–supply gap with adverse socio-economic
consequences. While concession innovation was adopted as a remedy tool, most of the
projects that were launched since this period had failed, and the reasons for the failure
had been attributed in greater part to ill-definition of obligations of the private party and
public sector organization in the transaction. For example, the proposed Lagos–Ibadan
concession road project witnessed little progress for upward of three years after it was
signed and before it was eventually terminated in December 2012 by the public party
(Agande, 2012). Similar underperformance experience occurred in Murtala Mohammed
Airport II (MMA2) concession projects, which occasioned renegotiation that had been
challenged as skewed toward the public party’s interest (Oduah, 2012). Mass protest by
users against tariff payment was experienced on Lekki–Epe road project, which
dragged the commencement of tolling by the private investor for one year after
September 2010, the agreed commencement date (Sanni, 2012). Most importantly, the
project had been under debate for nationalization since 2012.
In the traditional Design-Bid-Build (DBB) models, country-based Standard Form of
Contracts and International Standards, such as Joint Contractual Tribunal (JCT),
Federation International of Civil Engineers (FIDIC), New Engineering Contract (NEC),
among others, have been adopted in Nigeria, which provide a frameworks that define
parties’ obligations and protect the parties’ interests at all stages of the contracts. Such
frameworks embody contractual terms defining the parties’ obligations at both the
pre-contract and post-contract stages and clauses for enforcement of liabilities relating
to non-performance, delay in progress of performance, contract cancellation and
determination, among others. These frameworks have been very significant to
successful project delivery and avoidance of opportunity tendencies among parties.
Presently, the administration of concession-based projects in Nigeria is bedeviled by
varying challenges, particularly with respect to the definition of parties’ obligations.
Most often, these obligations are ill-defined and lack appropriate mechanisms for
enforcement, giving rise to protracted litigation (Sanni, 2012). While the resultant
scenarios, mostly, contract re-negotiation and cancellation, have negatively impacted
the popular acceptance of concession contracts in Nigeria, research efforts in the domain
of administration of parties’ obligations have been very limited. Besides the poor
 performance of traditional (budgetary) financing of public infrastructure, which had Concession-
created a wide demand–supply gap, the adoption of public–private partnership (PPP) based PPP
model has been identified to be on the increase in Nigeria since 2006 (Akinsiku et al.,
2014). However, the administrative and legal controversies with respect to delineation of
projects in
contractual obligations has necessitated the development of a framework that will Nigeria
ensure synergy and cooperation between the public sector and private sector investor in
the delivery of concession-based PPP projects. Therefore, the consideration of the study 29
from the Nigerian experience is justified on the embryonic stage of PPP and
experimentation with sizeable number of ongoing PPP projects.

Theoretical background and literature review

Concession is often considered as the contractual variant of the PPP model (Kerf et al.,
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1998). Other variants are described as mixed companies and are differentiated by the
extent of financial resources commitment or other inputs of the public party. Unlike the
traditional DBB model of infrastructure delivery, the concession model involves
expanded stakeholders/participants domain (Marques and Berg, 2010). According to
Button (2002), the number of project participants depends largely on the project
complexity and specification. The generic structure of concession essentially comprises
the public party (referred to as the principal) and the private investor (often referred to as
the concessionaire). The public party is the client/employer and the private party is the
executor/contractor when making a comparison with the traditional procurement
model. Other stakeholders involved in a concession contract include the financing
institutions, legal agency, operators, sub-contractor and suppliers. Central to the
concession contract administration is the concession period, which is the period during
which the concessionaire owns the property right of the projects. This period, usually
25-30 years, has been established by a number of studies (Li et al., 2005; Zou et al., 2008).
The public sector is the party who draws up the lists of infrastructure investment in
accordance to the national economic development plans. The primary obligation of the
public party is to provide an institutional framework that makes the project viable and
attractive to the private party (Kerf et al., 1998). The private sector/concessionaire, on
the other hand, is the party that is responsible for finance, operation and transfer of the
facility to the public sector at the expiration of the concession period (Rajan et al., 2010;
Jin et al., 2012). Moreover, the concessionaire retains the property right of the facility
until the expiration of the concession period during which he recovers his investment
and profit. The public party becomes contractually eligible to the facility and ownership
after the concession period.
The financial institutions are organizations solely involved as equity investors (Jin
et al., 2012). These include banks, insurance companies and multi-lateral agencies (Kerf
et al., 1998). The private party is not necessarily the contractor/operator in a concession
contract where the private investor (as a person) does not have the expertise. In this case,
the contractor undertakes the construction stage as a separate company by way of a
business venture. The same justification is applicable to the operator who may be
engaged by the private investor for the post-construction operation of the facility up to
the specified concession period. This arrangement has often necessitated the
establishment of a special purpose vehicle (SPV) in a concession contract (Kerf et al.,
1998; Grimsey and Lewis, 2002; Asenova and Beck, 2003; Oyegoke, 2005; Wilson et al.,
2010). The consultants’ obligations in a concession contract are essentially project
 JPMD design and construction based on concessionaire engagement. Other participants/
9,1 stakeholders (consultants, financiers, insurers, legal agents, sub-contractors and
suppliers) in a concession contract other than the public party are aggregated to a
singular outlet in a specific project administration. These are referred to as SPV (Kerf
et al., 1998). The SPV is usually a consortium or company established solely by the
private partner or jointly with the public agency for the purpose of project
30 implementation (Asenova and Beck, 2003; Grimsey and Lewis, 2004).
Gray and Larson (2003) and Wilson et al. (2010) have identified nine stages in
infrastructure delivery process. These are project inception, project definition, concept
development, design, document, procurement, construction, commissioning and
operation. In the traditional procurement models, the international standards (JCT,
FIDIC, NEC, among others) and country-specific standards form of contracts define the
obligations of the parties and liabilities for non-performance at each of these stages. In
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concession contracting model, it seems no studies have responded to specific

identification and categorization of the parties’ obligations at the various stages of
these delivery processes. Categorization of parties’ obligations is conceptualized as the
structuring of the concession contract such that the contract outlines who is responsible
for various aspects of tasks in the life cycle of the projects. In concession, most of the life
cycle activities are overseen by the government department, but in the direct
management of a private party via SPV. Administration of parties’ obligations in a
concession contract seems to have been sparingly discussed in the researchers’ quest to
develop concession best practice for infrastructure delivery. The transaction cost
economic theory has argued that, because contracts are often based on incomplete
information, it is imperative that each party’s obligations and liabilities are well
structured to protect the parties’ interests. The principal interest of the public party in
concession is to deliver the projects to the public and achieve value for money through
the services provided by the projects to the public. The investment of the private party
must also be protected in the face of uncertain factors not limited to macro-economic and
political environments.
Notwithstanding the dearth of studies in domain of parties’ obligations, a number of
generic PPP factors have been identified upon which other aspects of PPP have been
hinged (Abednego and Ogunlana, 2006; Ibrahim et al., 2006; Ng and Loosemore, 2007;
Sachs et al., 2007; Patrick et al., 2008; Ng et al., 2008; Fischer et al., 2010; Ke et al., 2011).
These include factors relating to land use/acquisition, consistency of government policy,
changes in law, variation in contract scope, contract re-negotiation, contract cancellation
and political interference, among others. Proponents of alliance contracting have sought
for frameworks, which legally define parties’ obligations and suitably enhance the
enforcement of liabilities against opportunity tendencies in the domains of these factors
(Mouraviev and Kakabadse, 2012). The main aim of their argument is to ensure that the
interest of the public party is protected while the private party’s investment is also
adequately guaranteed. While this is essential for attracting private sector investment in
infrastructure development, the growing number of empirical studies aimed at
concession best practice seems to have compromised in this domain of categorization of
parties’ obligations in alliance contracting.
In Nigeria, empirical studies on PPP model for infrastructure delivery are limited.
Notable studies include Adegoke et al. (2010), Ibrahim et al. (2010), Babatunde et al.
(2012), Oghojafor et al. (2012), Famakin et al. (2012), Sanni (2012) and Babatunde et al.
 (2016). Adegoke et al. (2010) only examined the relevance of PPP in the provision of Concession-
urban infrastructure. The significant criticism of the study was the limitation to based PPP
partnership in road transportation and waste management and its scope limitation to
Lagos metropolis, which may limit the generalization of the findings, considering the
projects in
variation in economic tempo of Lagos State and other states in Nigeria. Ibrahim et al. Nigeria
(2010) evaluated concessionaire selection process, but with no attention to issue of
parties obligations. The limited focus of Babatunde et al. (2012) to PPP generic success 31
factors provided little information for assessing parties’ obligations in concession-based
projects. Moreover, Oghojafor et al. (2012) only pointed to concession as a strategic tool
for earning more income for the government in the port operations, and Famakin et al.
(2012) limited the study to the evaluation of factors affecting the performance of partners
in joint venture PPP model. The study by Sanni (2012) is limited on a number of grounds.
First, it was biased for risks assessment. Besides, the study was limited to concession in
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the transportation sector and compromised in the investigation of parties’ obligations.

The study also used a relatively small sample size (two projects) and excluded some
important stakeholders such as the financing institutions and legal practitioners in the
assessment, thus significantly limiting the robustness of the findings.
Assessment of barriers to PPP projects implementation in Nigeria attracted the
attention of Babatunde et al. (2015). In all, ten groups of barriers comprising public and
private partners’ capacity deficiencies, weak political willingness and administrative
bottleneck, weak economic conditions and environmental-related problems,
social-related problems, corruption and inadequate governmental actions in PPPs, low
social acceptability, legal and regulatory-related problems, poor internal and external
stakeholders’ relationships, delay and politicization of the concessions and absence of
competition and due diligence were identified, which makes the PPP project
implementation susceptible to controversies, delays, litigations and cancellations.
Babatunde et al. (2016) explored the critical success factors to develop a process
maturity and determine the current maturity levels of stakeholder organizations in PPP
project implementation in Nigeria. Notwithstanding the robustness of the findings of
these studies, it is apparent that existing studies had conspicuously ignored the
assessment of parties’ obligations in concession. Against this background, this study
seeks to understand how the contractual obligations associated concession-based
projects could be structured for efficient delivery and optimum degree of cooperation
and inter-organizational integration between the government and private investor. By
addressing this research question, it would be possible to develop a framework for the
evaluation and allocation of obligations of parties, which could mitigate the risk of
failure of PPP projects in relation to the specific context of developing countries.

Background to public–private partnership projects in Nigeria

In response to PPP initiative for infrastructure delivery, the Federal Government
enacted the Infrastructure Concession and Regulatory (ICRC) Act 2005 to regulate PPP
transactions. The ICRC Act 2005 identified the scope of PPP investment in
infrastructure to include power plants, highways, seaports, airports, hydroelectric
power projects, water supply, irrigation, telecommunications, railways, land
reclamation, canals, dams, environmental remediation and clean-up projects, interstate
transport systems, industrial estates or township development, solid waste
management, satellite and ground receiving stations, ICT networks and database
 JPMD infrastructure, education facilities, housing, government buildings, tourism
9,1 development, trade fair complexes, warehouses and health facilities. While the
regulatory and legal capacity of the act were being developed, the first set of PPP
projects were launched in 2006, mainly by the Federal Government and Lagos State
Government. Prominent among these projects are MMA2 Airport Concession, Lekki–
Epe road concession, Lagos–Shagamu–Ibadan road concession, Federal capital
32 Territory Light Rail Project LOT 2, Kuje Water Works – supply and reticulation,
Shagamu–Benin–Asaba highway rehabilitation and upgrade, Abuja–Kaduna–Kano
highway rehabilitation and upgrade, National Inland Waterways, Kirikiri Lighter
Terminals 1 and 2 concession, Western Railway (Lagos–Kaduna–Kaura–Namoda–
Nguru concession rail), Eastern Railway (Port Harcourt–Kafanchan) concession, Island
Power Projects, Ayegbaju Concession Market and Sunshine Housing Estate
Development, among others. The projects scaled through the pre-contract stage;
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however, the execution stage is been trailed by a number of challenges, which are having
a negative impact on the popular acceptance of the PPP model. The wide range of
challenges that have trailed the projects have attracted empirical researches on PPP
transactions, however, with limited focus on categorization of parties’ obligations.

Data and methodology

The study adopted a descriptive qualitative approach. Generally, descriptive research
aims at observing, describing and documenting aspects of a situation as it naturally
occurs (Polit and Hungler, 1999). The approach was to rely on the experience of the
respondents who have participated in PPP projects in Nigeria to understand how wide
range of contractual obligations involved in the execution of the projects were delineated
between the parties with a view to generate information that could be used to
benchmark their categorization. The research instrument was a structured
questionnaire administered to respondents who have been involved in projects not
limited to Lekki–Epe concession road, Lagos–Ibadan concession road, Lagos Port
Terminal concession, Island Power Projects, Ayegbaju Concession Market and
Sunshine Housing Estate Development, among others. These include the active players
group (architects, estate surveyors, quantity surveyors, engineers and builders) and the
passive player groups (accountants/bankers/economists and lawyers) from both the
public and private sector organizations. The professional participants who are directly
involved with the design and execution are classified as active players, whereas passive
player are those with other administrative roles or have little contribution to design and
execution. The respondents’ selection combined both random and respondent driven
sampling approaches. The questions were structured and specifically designed to
check whether the respondents have appropriate knowledge and experience in
concession-based projects and whether they hold appropriate positions as
decision-makers so as to give credence to collected data. In this regard, the questions
were divided into two parts, where Part 1 identified the profile of the respondents. Part
2 related to the objectives of the study and focused on the delineation of 47 obligations,
which were identified through in-depth literature review between the public and the
private parties based on the respondents’ experience on the PPP projects. Moreover, Part
2 of the questionnaire was structured in a closed-type format such that the 47 obligations
were listed for evaluation on a score of 0-10 points, the proportion of expected
obligations by the public and private parties, where 0 represents lowest rating and 10
 represents highest rating. In this format, the respondents were able to complete the Concession-
questionnaire on average of 30 minutes. The questionnaire were self-administered in based PPP
collaboration with two research assistants over the period of March to August 2015. At
the end of the exercise, a total of 86 copies were retrieved; out of which, 81 were found to
projects in
be properly completed and considered suitable for the analysis. Data collected were Nigeria
analyzed using descriptive statistics including mean, concordance analysis and Mann–
Whitney U-test. 33
Data analysis and discussions
The general information about the respondents of the questionnaire is presented in
Table I-VII. Of the total 81duly completed copies of questionnaire retrieved, 39
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Coverage in the past five years No. (%)

Table I.
Within state 29 35.8 Coverage of
Within the geopolitical zone 13 16.0 organization’
National 17 21.0 operation in the past
International 22 27.2 five years

Respondents No. administered Frequency (%)

Architect 18 14 17.3
Quantity surveyor 18 16 19.8
Engineer 18 17 21.0
Estate surveyor 18 11 13.6
Builder/project manager 18 7 8.6
Lawyer 12 9 11.1 Table II.
Economist/financial/manager/banker 12 7 8.6 Type of respondents

Qualifications No. (%)

Master’s degree 37 45.7

First degree 23 28.4 Table III.
Postgraduate diploma 11 13.6 Academic
Higher national diploma 10 12.3 qualifications

Years of work experience No. (%)

0-5 15 18.5
6-10 23 28.4
11-15 15 18.5
16-20 14 17.3 Table IV.
21-25 10 12.3 Years of work
Above 25 4 4.9 experience
 JPMD Affiliation Frequency (%)
9,1
NIA 22 30.6
NIQS 16 22.2
NSE 11 15.3
NIOB 4 5.6
34 NIESV 11 15.3
CIB 5 6.9
NBA 7 9.7
Others 16 22.4
Total 81 100.0

Table V. Notes: NIA ⫽ Nigerian Institute of Architects; NIQS ⫽ Nigerian Institute of Quantity Surveyors; NSE ⫽
Professional Nigerian Society of Engineers; NIOB ⫽ Nigerian Institute of Building; NIESV ⫽ Nigerian institute of estate
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affiliation surveyors and valuers; CIB ⫽ Chartered Institute of Banking; NBA ⫽ Nigerian Bar Association

No. of PPP/concession projects undertaken Frequency (%)

0-5 38 46.9
6-10 27 33.3
Table VI. 11-15 1 1.2
Number of Over 15 3 3.7
PPP/concession No response 12 14.8
projects undertaken Total 81 100.0

Type of projects Frequency

Transportation 21
Water infrastructure 10
Power project 23
Table VII. Housing infrastructure 57
Participation of the Commercial/market project 26
respondents in Communication 7
alliance contracts Marine infrastructure 4

responses were from the public sector organizations (48.1 per cent), which were lower
than the 42 responses (51.9 per cent) obtained from the private sectors organizations.
Analysis of the coverage of the operations of the respondents’ organization (Table I)
showed that 35.8 per cent of the organizations operated only within their state, and16.0
per cent had operated within their geo-political zones, while 21.0 per cent and 27.2 per
cent had operated at the national and international levels, respectively. The aggregate of
64.2 per cent of respondents’ organizations who had operated beyond the shores of their
state revealed the positions of the respondents to provide information on national scope
coupled with international experience on alliance contract.
The distribution of the respondents (Table II) showed that architects involved in the
study represented 17.3 per cent of the respondents, while 19.8 per cent were quantity
 surveyors. Moreover, engineers were 21.0 per cent, and 13.6 per cent of the respondents Concession-
were builders/project managers. Each of the estate surveyors and economist/financial based PPP
manager/banker involved represented 8.6 per cent, while the lawyers represented 11.1
per cent. These results showed that the respondents covered construction professionals,
projects in
financial administrators and legal practitioners who are significant infrastructure Nigeria
stakeholders who could provide adequate assessment of a concession contract in the
study area. 35
In Table III, the academic qualifications of the respondents showed that the
respondents that held a bachelor’s degree were 28.4 per cent of the sample. The highest
numbers of the respondents were those with a master’s degree and represented 45.7 per
cent of the respondents. Furthermore, 13.6 per cent obtained their post graduate diploma
and 12.3 per cent their higher national diploma. Based on these academic qualifications,
the respondents were deemed to possess adequate academic training to supply reliable
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data for this study.

The mean number of years of work experience of the respondents was estimated at 12
years, as shown in Table IV, which represents the working experience of about 53.0 per
cent of the respondents. With this average working experience, respondents were
deemed experienced enough to supply reliable data on issues relating to infrastructure
projects.
Analysis of the professional qualifications of the respondents (Table V) showed that
the 81 respondents (100.0 per cent) were either associate or corporate members of their
various professional bodies or possessed some other professional qualification.
In Table VI, the average number of PPP/concession projected where respondents
were involved was established as five. This, however, represents the number of projects
where less than half (46.9 per cent) of the respondents had been involved. These results
justified an emerging state of alliance procurement model in Nigeria. The average of five
projects could, however, be considered adequate at this stage of assessment of
concession contract in the study area.
The overall results of the analysis of the general information about the respondent
were considered as significant criteria to assess the credibility of the respondents.
The participation of the respondents in alliance contracts showed the highest in
housing infrastructure (57). In all, ten respondents had been involved in water projects
while 23 and 21 respondents had been involved in power and transportation projects,
respectively. Moreover, 26 respondents had been involved in a commercial project, while
seven were involved in communication projects. Least number of respondents (four) had
participated in marine infrastructure. The results showed that the respondents had
experience in more than one category of infrastructure. Based on this criterion, the
respondents (as a whole) were adjudged to have vast experience in all categories of
infrastructure and could provide adequate information for assessment of all categories.
The findings also agreed with the study by Babatunde et al. (2012) that adoption of PPP
procurement models is higher in transportation and housing infrastructure in Nigeria in
comparison to other infrastructure categories.

Categorization of the obligations of public and private parties in concession-based

projects
Table VIII shows the examination of the obligations of public and private parties in
concession-based projects. The respondents were asked to rate the level of expected
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9,1

36

projects
JPMD

Table VIII.

concession-based
obligations of public
Categorization of the

and private parties in

MAC Mann–Whitney Significance Eta MADJ
S/N Obligations Public Private U test (␳) coefficient ␩ Public Private Remark

1 Funding of the feasibility study of the project 3.70 6.27 ⫺4.527 0.001 0.337 0.114 3.70 6.27 Private
2 Funding of the sensitization of the users 6.11 3.90 4.186 0.001 0.314 0.099 6.11 3.90 Public
3 Funding of the planning approval for the project 5.00 5.00 0.000 1.000 0.000 0.000 5.00 5.00 Shared
4 Cost associated with community liaison in the 5.94 4.11 3.390 0.001 0.259 0.067 5.94 4.11 Public
project domain
5 Charges and costs of land acquisition and usage 7.93 2.05 12.165 0.001 0.693 0.480 7.93 2.05 Public
6 Monetary compensation associated with land 7.63 2.37 10.597 0.001 0.642 0.412 7.63 2.37 Public
acquisition and usage
7 Cost associated with contamination at the site 3.44 6.56 ⫺5.984 0.001 0.428 0.183 3.44 6.56 Private
resulting from project activities
8 Cost of supportive infrastructure 5.65 4.47 2.367 0.019 0.184 0.034 5.65 4.47 Public
9 Cost of site encumbrances 4.48 5.52 ⫺2.112 0.036 0.165 0.027 4.48 5.52 Shared
10 Cost associated with social disturbances– 7.43 2.58 9.954 0.001 0.618 0.382 7.43 2.58 Public
resettlement and rehabilitation of the people
affected by the project
11 Cost associated with treatment of fossils and 5.21 4.79 0.771 0.442 0.061 0.004 5.19 4.81 Shared
antiquities if found on project site
12 Environmental impact assessment of the project 4.36 5.64 ⫺2.115 0.036 0.165 0.027 4.36 5.64 Private
13 Ecological impact assessment of the project 5.05 4.99 0.021 0.983 0.002 0.000 5.05 4.99 Shared
14 Assessment and relocation of statutory facilities, 6.56 3.47 5.511 0.001 0.399 0.160 6.56 3.47 Public
e.g. oil pipeline and PHCN facilities
15 Assessment and relocation of third party 5.33 4.67 1.204 0.230 0.095 0.009 5.33 4.71 Shared
facilities, e.g. telecommunication facilities
16 Cost of assessing shadow tariff structure 4.99 5.01 ⫺0.116 0.907 0.009 0.000 4.99 5.01 Shared
17 Cost of demand survey 3.68 6.33 ⫺4.461 0.001 0.333 0.111 3.68 6.33 Private
18 Cost of preliminary design 2.91 6.99 ⫺7.047 0.001 0.487 0.237 2.91 6.99 Private
19 Cost of geotechnical investigations 3.26 6.74 ⫺6.377 0.001 0.450 0.203 3.26 6.74 Private
20 Cost of detail designs 2.69 7.35 ⫺9.062 0.001 0.582 0.339 2.69 7.35 Private
21 Preparation of contract documentations 4.37 5.69 ⫺2.398 0.018 0.186 0.035 4.50 5.69 Shared
22 Specification of the facility’s construction and 4.73 4.27 ⫺2.961 0.004 0.228 0.052 4.27 5.73 Public
operation
23 Cost of bid transaction and documentation 3.58 6.47 ⫺5.340 0.001 0.389 0.151 3.58 6.47 Private
(continued)
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MAC Mann–Whitney Significance Eta MADJ

S/N Obligations Public Private U test (␳) coefficient ␩ Public Private Remark

24 Preparation of conditions/terms of the contract 5.56 4.51 1.863 0.064 0.146 0.021 5.56 4.60 Shared
25 Definition of obligations and liabilities for 5.48 4.63 1.909 0.058 0.149 0.022 5.48 4.73 Shared
default by parties
26 Cost of engagement of independent consultants 4.49 5.51 ⫺2.012 0.046 0.157 0.025 4.60 5.51 Shared
27 Cost of establishment of project governance 5.15 4.85 0.378 0.706 0.030 0.001 5.15 4.85 Shared
structure
28 Preparation of financing plan and 2.91 7.09 ⫺9.928 0.001 0.617 0.381 2.91 7.09 Private
documentation
29 Securing of bank guarantee 2.72 7.26 ⫺9.565 0.001 0.603 0.364 2.72 7.26 Private
30 Securing of performance bond 2.49 7.51 ⫺11.120 0.001 0.660 0.436 2.49 7.51 Private
31 Consumer demand guarantee 4.19 5.84 ⫺3.073 0.002 0.236 0.056 5.48 4.19 Public
32 Warrantees to comply with the contract term 3.79 6.21 ⫺4.726 0.001 0.350 0.122 3.79 6.21 Private
33 Guarantees 7.94 2.06 ⫺13.492 0.001 0.730 0.532 7.94 2.06 Public
34 Insurance against third party claims 2.70 7.30 ⫺9.794 0.001 0.612 0.375 2.70 7.30 Private
35 Insurance against breach of statutory duty 3.60 6.40 ⫺5.430 0.001 0.394 0.156 3.60 6.40 Private
36 Property/asset/material/component damage 2.31 7.69 ⫺12.167 0.001 0.693 0.481 2.31 7.69 Private
insurance
37 Insurance against death and personal injury 1.79 8.21 ⫺16.620 0.001 0.796 0.633 1.79 8.21 Private
38 Indemnity insurance 2.41 7.59 ⫺11.272 0.001 0.665 0.443 2.41 7.59 Private
39 Insurance against nationalization of the project 4.86 5.14 ⫺0.445 0.657 0.035 0.001 4.86 5.14 Shared
40 Formulation of legal and regulatory framework 5.98 4.02 4.138 0.001 0.311 0.097 5.98 4.02 Public
41 Cost of legal documentation 4.26 5.74 ⫺2.893 0.004 0.223 0.050 4.26 5.74 Private
42 Regulation of supply of 6.22 3.78 ⫺4.250 0.001 0.318 0.101 6.22 3.78 Public
material/labor/component
43 Mitigation of foreign currency restrictions 6.89 3.11 7.712 0.001 0.521 0.271 6.89 3.11 Public
44 Cost of project monitoring and evaluation 5.19 4.81 0.768 0.444 0.061 0.004 5.19 4.85 Shared
45 Documentation of step-in right 5.37 4.63 1.825 0.070 0.143 0.020 5.37 4.72 Shared
46 Determination of toll points 5.33 4.67 1.642 0.103 0.129 0.017 5.33 4.75 Shared
47 Determination of tariff structure 5.59 4.41 2.852 0.005 0.220 0.048 5.59 4.62 shared

Notes: ␩ ⫽ Eta squared correlation co-efficient; actual mean (MAC); adjusted mean (MADJ); ␳ ⫽ significance threshold; ␶ ⫽ 0.000 ⱕ ␶ ⱕ 0.450

Table VIII.
37
Nigeria
projects in
based PPP
Concession-
 JPMD obligations in the 47 obligations identified from literature and those peculiar to the
9,1 Nigerian environment on a scale involving ratings between 0 and10, where 0 represents
lowest rating and 10 representing highest rating. These were used to compute the mean
ranking (MAC) for each of the identified obligations. The degree of concordance (0.000 ⱕ
␶ ⱕ 0.450) in the rating amongst the respondents from the two parties’ organizations
revealed a low agreement. The low concordance could be explained in part to
38 contrasting interests of the parties, which the participants from the organization stand
to protect. The private sector organization is undertaking a concession transaction as a
business venture to maximize profits on investment, whereas the public party
organization is interested in the transaction to take the advantage of the finance and
technical expertise of the private party to deliver projects, which otherwise would have
been delivered by its limited resources. On the other hand, the ratings could have been
influenced by bias and inexperience as concession contracts had not been extensively
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practiced in Nigeria for sufficient skills of the participants on some issues related to the
innovation. The low ratings, however, necessitated the test of the degree of dispersion of
the rating both among the respondents from different parties and within a party group.
This was achieved through eta squared coefficient of correlation and Mann–Whitney U
test. The correlation coefficients obtained were used to adjust the calculated mean for
each obligation to obtain an adjusted mean (MADJ). The allocation of the obligations to
either the public or private party was based on the MADJ on half adjusting principle
earlier discussed by Ke et al. (2010). The Ke et al. (2010) half adjusting principle was
adopted in developing risk allocation framework in alliances contracting and presented
the risk allocation as mean values (MAC) of participants’ responses. In all, three risk
allocation criteria were identified according to the principle. These were risks with a
mean score smaller than 2.5 allocated to the public party; risks with a mean score greater
than or equal to 2.5 and smaller than 3.5 equally shared by both parties; and risks with
a mean score greater than or equal to 3.5 allocated to the private party.
The assessment in Ke et al. (2010) was based on a 1-5-scale rating and because the
assessment in this study is on a 1-10 rating, the adjusting principle was modified to a
10-point scale. In this regard, the mean score for the obligations were compared in each
case and the allocation procedure was allocating an obligation to the public party where
the approximate mean value of the private party is less than 5.0; allocating an obligation
to the private party where the approximate mean value of the public party is less than
5.0; and obligation where both parties scored mean value approximated to 5.0 was
classified as shared. The allocation was based on calculated MAC adjusted by coefficient
of dispersion (␩) to MADJ values. The values at the significance level of 5 per cent of
Mann–Whitney U test were used as the criterion for the application of the adjustment
coefficient. Obligations with mean value greater than 5.00 on a scale of 10 were allocated
to public party where the Mann–Whitney U test is significant at 5 per cent, otherwise the
MAC below respective threshold was adjusted by the corresponding coefficient of eta
square. The eta squared correlation tends toward zero when the mean value of an
obligation for public party and private party tends equality. In this regard, where the
significance coefficient is greater than the threshold of 0.05, the value of the lesser mean
is adjusted by the corresponding eta correlation (␩). The significance threshold became
perfectly insignificant at 1.000. At these points, zero adjustment coefficient was revealed
by the eta square (␩) adjustment on the estimated mean MAC, and the estimated MAC
was expected to be equitably 5.00 to both the public party and private party. The
 allocation formula at this threshold is an equitable sharing of the obligation at half-half. Concession-
This is an absolute situation of half adjusting principle. based PPP
These situations were obtained in obligations like funding of planning approval
(0.000), ecological impact assessment (0.000) and cost of assessing shadow tariff
projects in
structure (0.000). In these situations, the estimated MAC needed no adjustment as the Nigeria
multiplication of the estimated MAC and the eta square (␩ ⫽ 0.000) produced zero
values. On the other hand, the MADJ values for other obligations are revealed in 39
Table III. Based on the allocation criteria and the adjustment procedure discussed
above, obligations of sensitization of users, cost associated with community liaison,
charges and costs of land acquisition and usage and compensation associated with
land acquisition and usage were allocated to the public party. Other obligations that
were allocated to the public party are provision of supportive infrastructure, cost
associated with social disturbances (resettlement and rehabilitation of the people
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affected by project), assessment and relocation of statutory facilities (e.g. oil

pipeline), formulation of legal and regulatory framework, guarantees and mitigation
of foreign currency restrictions.
Allocation of sensitization of users to the public sector is worthwhile as this would be
necessary to forestall future protest against toll payment by the citizens when the
private party has completed the project and toll payment is commenced. Moreover, the
Land Use Act of 1978 places the instrument of land usage on the government and obliges
the public sectors under the Land Use Act to compensate initial occupier of a land
required for public use and for social disturbances of people thereby affected. In this
regard, obligations such as cost associated with community liaison in the project
domain, charges and costs of land acquisition and usage, monetary compensation
associated with land acquisition and usage and cost associated with social disturbances
(resettlement and rehabilitation of the people affected by the project) were allocated to
the public party. The same justification is applicable to relocation of statutory facilities
(such as oil pipeline), formulation of legal and regulatory framework and mitigation of
foreign currency restrictions, which relate to exclusive authority and essentially legal
and macro-economic policies of the government. Allocating provision of supportive
infrastructure to the public party is justified to minimize charges and toll payment to the
citizens, which otherwise would add to the private party’s cost and subsequently add to
the charges to the citizens.
The findings agreed with Ibrahim et al. (2006) that land acquisition should be
allocated to the public party as land matter falls directly within public sector policy
group or are such that the public party is in the best position to manage in the Nigerian
context. The allocation of obligation of land acquisition to the public party disagreed
with Voelker et al. (2008) with respect to Indonesian power project, where on the
contrary, land acquisition obligation was attributed to the private party. The variation
in the findings could be attributed to difference in the political environments of Nigeria
and Indonesia, as the political environment in Nigeria is at present relatively unstable.
Allocation of mitigation of foreign currency restrictions to the public party disagreed
with Sachs et al. (2007) who argued that political risks that are directly attributable to
public party’s actions, such as restrictions on converting or transferring currencies,
political violence and expropriation or breach of contract, are to be insured through both
public and private parties’ accounts. The finding on allocation of cost of community
liaison to the private party disagreed with Cheung et al. (2010)’s position on allocating
 JPMD cost of community liaison to the public party. This could have been influenced by the
9,1 experience of the respondents and the present immature business environment of
concession in Nigeria.
Allocation of the provision of supporting infrastructure to the public party agreed
with Zhang and Kumaraswamy (2001), Ke et al. (2011) and Quraeshi and Luqmani’s
(2011) empirical evidences on the provision of supportive infrastructure by the public
40 party in PPP projects. The finding on allocating provision of guarantee to the public
party validated the findings by Irwin et al. (1999), Sachs et al. (2007), Wamuziri and
Clearie (2005), supporting the importance of guarantee and their provisions by the
public party. In light of unstable government policies and non-availability of risk
reduction frameworks for private sector investment in Nigeria, public party’s
involvement by providing guarantees is highly significant, as earlier identified by
Babatunde et al. (2012). The obligation of the legislation that is necessary for the private
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party to undertake the design, construction and charge the tolls was allocated to the
public party in agreement with Hannah (2008). This is agreeable as the public party is
the custodian of the instrument of law.
Obligations of feasibility study, cost associated with site contamination,
environmental impact assessment, demand survey, preliminary design, geotechnical
investigations, detail designs, specification of the facility’s construction and
operation, cost of bid transaction and documentation, preparation of financing plan
and documentation, performance bond, warranties to comply with the contract term,
insurance, legal documentation were allocated to the private party. The allocation of
obligation of feasibility study to the private party agreed with findings of Shaw et al.
(1996), Wamuziri and Clearie (2005), Zou et al. (2008), Wilson et al. (2010) and Singh
and Kalidindi (2009) that the private party conducts feasibility studies of proposed
solutions as part of bid preparation requirements. The findings on allocation of
obligation of feasibility study to the private party, however, disagreed with Voelker
et al. (2008) and Jingfeng et al. (2009) submission on the allocation of obligations
feasibility to the public party in PPP transactions. The finding on allocating
environmental impact assessment (EIA) to the private party agreed with the finding
of Wamuziri and Clearie (2005) who considered EIA by the private party as part of
project viability assessment.
The finding on allocation of design obligations is in concordance with findings of
Askar and Gab-Allah (2002), Zhang (2004), Hannah (2008), Shaoul et al. (2010) and
Mouraviev and Kakabadse (2012) who attributed the cost of preliminary design and
detailed design to the role of a private party. Considering the private party’
comparative advantage of technical expertise, this is agreeable as it will ensure
quality design and saving of effort and resources at the construction stage of the
project. Moreover, the designers would be able to translate the design expertise to
the on-site operation, rather than having to work on designs by consultants of public
party. Allocating the assessment of ground conditions, geotechnical and
topographical surveys to the private party is worthwhile as soil properties are
unknown to the project team and unexpected finds/discovery and contamination are
capable of delaying the project progress or lead to increased costs to the private
party as earlier asserted by Wamuziri and Clearie (2005) and Fischer et al. (2010).
Allocating the obligation associated with site contamination agreed with the
findings of Love et al. (2000) that contamination is a risk at the developmental phase
 that should be undertaken by the private party. Its allocation to the private party is Concession-
further justified because public party may not necessarily anticipate this and may based PPP
not consider it in the bid preparation. The findings on provision of performance
bonds by the private party agreed with the position of Kerf et al. (1998) that the
projects in
instrument of performance bonds and insurance cover to lower the risks of Nigeria
non-compliance should be provided by the private party. This position is acceptable
because these risks are unavoidable risks of doing business, and they could be better 41
borne by the private party, who can obtain some protection by taking out insurance.
Obligations that were found to be shared between the public and private parties were
cost of site encumbrances, cost associated with treatment of fossils and antiquities,
ecological impact assessment of project, assessment and relocation of third party
facilities (e.g. telecommunication facilities), cost of assessing shadow tariff structure and
preparation of contract documentations. Other obligations that were found to be shared
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by both parties were preparation of conditions/terms of the contract, definition of

obligations and liabilities for defaults by parties, engagement of independent
consultants, cost of establishment of project governance structure, insurance against
nationalization of project, cost of project monitoring and evaluation, documentation of
step-in right, determination of toll points and determination of tariff structure. The
sharing of insurance obligation by both the public and private parties agreed with the
findings of previous studies (Zhang and Kumaraswamy, 2001; Boudet et al., 2011),
which skewed toward insurance obligation been shared between the public and private
parties. The finding also agreed with Boudet et al. (2011) that attributed the obligation of
risk insurance against nationalization of project in volatile political environment to the
public party, especially in the developing countries. In the Nigerian political climate, a
change in government almost translates to change in government policy, and this may
affect the policy-related project that is typical of a concession project. In this regard, it
would be demanding of the private party to provide an insurance cover for possible
associated risks as well.
The allocation of planning approval to both parties agreed in part with Rajan
et al. (2010) that planning approval should be a shared obligation between the public
and private parties with the clearance obligation relating to the project as a whole
allocated to the public sector, and clearance obligation relating to specific activities
falling within the scope of work of the concessionaire allocated to the concessionaire.
However, the finding disagreed with Harevi and Hajheosseini (2011), who obliged
the public sector to all activities relating to the approval of the designs. The design
approval process could be fast tracked if undertaken by the public party as the
public party’ agency is responsible for design approval irrespective of the party to
which the obligation is allocated. The findings on sharing of obligation of relocation
of existing utilities between both parties agreed in part with Goodrum et al. (2009),
who found that frequent coordination, cooperation and communication between the
parties would expedite utility relocation work. Because the initial location of the
facilities was approved by the agency of the public sector, the public sector would
stand in the comparative advantage of fast tracking the process of relocation and
possibly at a comparable reduced cost than if allocated to the private party. The
allocation of the obligation of establishing governance structure for the project to
both parties is in concordance with Wilson et al. (2010), who stated that both the
public and private sector organizations have governance requirements and these
 JPMD would form the basis of the governance of a partnership project. This finding is
9,1 significant to advocacy for the establishment of PPP units in a state where
concession projects have been commissioned. Moreover, the obligation of both
parties to prepare the contract documents agreed with Mahalingam (2010), who
identified the possibility of unbalanced contractual terms with a majority of the
risks on the private sector where the public party prepares the contract document.
42
Conclusion
Categorization of parties’ obligations in concession contract has been sparingly
discussed in the researchers’ quest at developing concession best practice for
infrastructure delivery. Consequently, the administrative and legal controversies with
respect to delineation of contractual obligations between the private investors and the
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public sector organizations continued to increase the risk of failure of concession

contracts. Benchmarking of parties’ obligations is therefore a significant step in the
administration of a concession contract, especially in the Nigerian context where the
ill-defined nature has negatively impacted the popular acceptance of a concession
contract. The main aim of the study is the development of the framework for the
evaluation and allocation of obligations of parties, thereby enhancing the synergy and
cooperation between the public and private sector organization. The study concluded
that the obligations of sensitization of users, cost associated with community liaison,
charges and costs of land acquisition and usage and compensation associated with land
acquisition and usage were allocated to the public party. Other obligations that were
allocated to the public party are provision of supportive infrastructure, cost associated
with social disturbances (resettlement and rehabilitation of the people affected by
project), assessment and relocation of statutory facilities (e.g. oil pipeline), formulation
of legal and regulatory framework, guarantees and mitigation of foreign currency
restrictions. Moreover, obligations of feasibility study, cost associated with site
contamination, environmental impact assessment, demand survey, preliminary design,
geotechnical investigations, detail designs, specification of the facility’s construction
and operation, cost of bid transaction and documentation, preparation of financing plan
and documentation, performance bond, warranties to comply with the contract term,
insurance, legal documentation were allocated to the private party. This benchmark is
expected to eliminate variability of contents and allocation of obligations or extent of
obligations to parties though the current use of un-standardized memorandum of
understanding. The findings would also minimize the complexity in the administration
of concession contracts and provide part of the information requirements for developing
standard form of concession contract in Nigeria. The study has the implication for the
evaluation and allocation of obligations of parties, which could mitigate the risk of
failure of PPP projects in relation to the specific context of developing countries. The
limitation of this benchmarking, however, is the problem of generalization to matured
economies where PPP models had been extensively and successful implemented.

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 JPMD Further reading
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Corresponding author
Akintayo Opawole can be contacted at: tayodk@yahoo.com
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