Public-Private Partnership Agreements: Difficulties Faced During The Life Cycle Of The Agreements

Introduction

In the present day, various infrastructure projects are being built on multiple PPP models such as Build Operate Transfer (BOT), Design Build Operate (DBO), Design Build Finance Operate Transfer (DBFOT), etc.¹ Whether it is a large-scale public-private partnership project or a project being undertaken in a nearby small village, every project is inevitably bound to encounter numerous uncertainties and risks from its inception to its completion, and often even after completion. Detailed and elaborate contracts govern these projects, consisting of General Conditions of Contract (GCC) followed by Special Conditions of Contract (SCC) that supplement the GCC and are specific to a particular project. All of these projects are governed and undertaken after a lot of due consideration and diligence, including preliminary surveys and assessments. The problem faced during a project's lifecycle can be majorly divided into two heads, i.e., 'Risks' and the other is 'Uncertainties.'

Risks are potential threats that can be identified and could lead to variation in the project's baseline objective, might change the scope of the project, may cause untimely delay, increase the overall cost of the project, and in some cases, might even make the execution of the project impossible or impractical. Whereas uncertainties, on the other hand, cannot be foreseen and are inevitable. The conception that people have of an unforeseen event is always a negative connotation; however, that is not always the case.² For example, let us take a scenario where, due to a change in government policy, import duties on iron were drastically reduced after the contract was signed. The contractor, who had priced the material based on higher duty rates, ended up saving significantly on procurement. The unforeseen policy change improved his profit margin without altering the scope of work. Understanding the difference between risks and uncertainties is very important for the proper execution of the project, its planning, and contract management. However, what makes projects particularly complex is that such risks and uncertainties are not confined to one point in time; they can occur at any stage of the project lifecycle. From conceptualisation and feasibility assessments to planning, execution, monitoring, and handover, each phase introduces its own legal, technical, regulatory, and commercial challenges. The uncertainties that greatly impact the progress of construction projects vary significantly due to different reasons such as weather conditions, shortage in raw material, fluctuation in the market, availability of human resources, political structure, etc., which, on the other hand, adversely impact the decided timelines and much more.

Let us first understand the key possible stage-wise uncertainties and risks that are faced during the lifecycle of the project:

Feasibility

This phase is mostly concentrated towards evaluating the viability of the project, which requires conducting a thorough market analysis along with analysing the impact of the overall project. If this part of the project lifecycle is not conducted efficiently, the project becomes prone to various shortcomings, including untimely delays, an increase in the overall cost of the project, and even cause the project to come to a halt midway, causing huge financial losses to all the stakeholders involved.

One of the significant examples of such shortcomings include the Navi Mumbai International Airport project that was originally conceptualised in 1990 to reduce congestion at Mumbai's Chhatrapati Shivaji Maharaj International Airport. The project came to a halt for several years due to the sensitive area where the project was proposed to be built, and the protests faced from people refusing to vacate the land even after accepting the compensation package offered by the CIDCO, as the alternative land that was being offered was not developed. This underscores the critical importance of thorough early-stage assessment to ensure project viability and prevent long-term setbacks.³

Initiation and Planning

This phase is significant for a project to get duly executed, and thus, the party who wants the project to be implemented properly should ensure that it has carried out the necessary due diligence to eliminate the possible risks that can arise during the execution of the project. This phase involves figuring out which model is best suited for a particular project, as it helps in the smoother execution of work throughout the project. Moreover, the proposed budget that is to be allocated to the project is decided, and the scope of the project is narrowed down, along with the fixing of the stipulated completion date and an estimate of resources required for proper execution of the project. At this stage, uncertainties primarily arise due to the overlapping jurisdiction of authorities, issues related to land acquisition, and ambiguity in the scope of work to be carried out by different parties to a contract, as well as revisions or changes in existing policy/government structure, social and community resistance, and other factors.

Uncertainty at the initial stage of a project can derail progress even before implementation begins. A key example is the Amaravati Capital City Project in Andhra Pradesh. Following the bifurcation of the state in 2014, then Chief Minister N. Chandrababu Naidu proposed developing Amaravati as a greenfield capital city, integrating administrative, legislative, and judicial functions. However, after a change in government in 2019, the YSR Congress Party (YSRCP) under Y. S. Jagan Mohan Reddy introduced a three-capital model designating Visakhapatnam as the executive capital, Amaravati as the legislative capital, and Kurnool as the judicial capital. This policy shift led to stalled construction, delayed land pooling payments, and prolonged legal disputes, leaving the project largely inactive. In 2024, the Naidu government reinstated Amaravati as the sole capital and resumed development, underscoring how political uncertainty at the intake stage can profoundly impact large-scale infrastructure projects.⁴ The initial overall cost of the project, which was about ₹51,000–₹64,000 crores has increased by roughly 40 - 45%, due to inflation, delays, and damage caused to the unfinished work.⁵

Execution & Monitoring

Execution and implementation of the contract is done by the entity that has been allotted the contract, whereas the appointing authority is responsible for keeping checks on the quality standards and completion of milestones on time. It also takes care of the disbursement of money for work executed according to the contractual agreement entered into between the parties. The contractual commitments during this stage are most vulnerable to suffering from risks and uncertainties.

Differing Site Conditions (DSC)- Subsurface and Latent Site Risk: In some projects, the actual site condition proves to be materially different from the one that was anticipated, even after duly carrying out the assessment and geotechnical studies required as per contractual obligations. This can happen due to a variety of reasons, including those that do not become apparent during site visits, as they were present beneath the surface level on which the test was conducted, or due to not taking into consideration a sufficient sample area in order to uncover the true picture. For example, during the execution of the road project, a geotechnical study was conducted of a surface area spanning 5 km for a project covering a stretch of 38 km, and due to the assessment being limited to 5 km, the actual condition for the majority of the stretch could not be determined accurately. In scenario can occur due to a variety of reasons, such as incomplete or outdated information. This scenario may occur if, after the pre-bid meeting, there are changes in the condition of the site where the work will be carried out. Such changes can be caused by various factors, including natural events (e.g., erosion, flooding), third-party developments (like nearby construction or work undertaken by others on the same site under different obligations), or simply the passage of time due to a gap between the actual start date and the assessment date. For example, during the construction of the Delhi Metro's Heritage Line, there was a discovery of historically significant remains of Akbarbadi Mosque, a 17th-century structure relating to the Mughal Empire, due to which the project layout and scope were changed. As a result, the Delhi Metro Rail Corporation (DMRC) had to shift the station by 25 metres, increasing the overall cost of the project.⁶

Supply Chain Disruption: Delay in the supply of required material or machinery required for the execution of the project could occur due to multiple reasons, such as an increase in import duty of that particular material or due to a change in international relations, the occurrence of a force majeure event, and many more.

Non-performance or Insolvency of Contractor/Subcontractors: The quality of the work to be executed by the contractor could be affected by the non-performance or substandard performance by another contractor or subcontractor on the same site.⁷ The insolvency of one of the largest construction companies, Carillion PLC, caused the discontinuation of several ongoing contracts.

Maintenance Period

During this phase, the contractor has duly undertaken and finished the work within its scope and has been issued a completion certificate for the same. In some kinds of contracts, there is usually a defect liability period that concerns rectifying the defects arising in the already executed work. This period is limited to maintenance and repair obligations concerning the executed work and typically extends for a fixed duration beyond the contract's base period. Although the main part of the contract has already been executed, there are still difficulties that can arise. During this time, mostly the uncertainties and risks that are faced by the contractors are latent defects going to the root and coming to the surface during the defect liability period without any fault in the work executed by the contractor, but due to the passage of time or external factors.

Closure Stage

This stage marks the end of the project lifecycle, and the operational control is finally handed back to the employer, and a final reconciliation of contractual and financial obligations is carried out. It is ensured that the contractor has duly performed and carried out the work as per the terms of the contract in order to avoid any future disputes that may come up. All the financial dues are cleared, and a necessary certificate indicating the completion of work is issued to mark the end of the contract. During this stage, mostly latent defects are pointed out and asked to be rectified, increasing the time and cost of the contractor, or any deficiency that might have occurred and is likely to affect the already executed work of the contractor.

Now that we have discussed various stages of a project's lifecycle, it becomes important for us to go through some of the doctrines that often come into play when such uncertainties and risks crop up during the project. These doctrines, when looked at, give us an idea about the framework for assessing and responding to these uncertainties. Certain important concepts, such as Force Majeure, Change in Law, Impossibility or Impracticability, and Change of Scope, are frequently invoked in PPP project disputes. Understanding these doctrines gives us a fair idea of navigating through the sea of uncertainties.

Force Majeure: Force Majeure is the occurrence of an unanticipated event that makes the performance of the contract impractical/impossible to perform. It is a misconception that for an event to be classified as force majeure, the event should render the possibility of the original scope of the contract impossible.⁸ The key ingredient is that the event should be unforeseen and must cause a drastic change from what was contemplated by the parties at the time of entering into the contract.

Change in Law

It is a legislative or regulatory change that occurs in the specific law or general law governing the subject matter of the contract. This change in law occurs after the contract is entered into. Different projects can have different interpretations of what would qualify as a change in law⁹ and due to the occurrence of a change in law, the rights and liabilities might be affected due to a change in the scope of work or an increase in the overall project.

Impossibility or Impracticability: Performance on the part of either side of the party may be excused under common law principles when it becomes objectively impossible or economically impractical to perform a contract. For example, in a PPP toll road project, a severe and prolonged flood washes away key portions of the highway, making repairs not feasible within a reasonable cost or time. Here, the contractor can be relieved from the contractual obligations under impossibility or commercial impracticability.

Change of Scope:

Most projects usually undergo various changes, such as revamped surroundings, technical upgrades, regulatory directives, and much more. All of these scenarios are capable of changing the original scope of the agreement that was agreed upon between the parties.

Conclusion

Projects rarely have a smooth sail from inception to closure and are faced with innumerable difficulties till the final handover. This makes it essential for contractors to carry out due diligence to avoid the already identifiable risks that could come up during the execution period and study the uncertainties that could arise in the kind of contract that they are working on in the past to be better prepared to deal with them. This also mandates that parties to a construction contract decide on terms and conditions beforehand, to better manage unforeseen circumstances.

Footnotes

1. Public Private Partnerships in India, PPP Cell, Dept. of Economic Affairs, Ministry of Finance, Govt. of India, https://www.pppinindia.gov.in/glossary (accessed July 16, 2025)

2. Morten Wied et al., Wrong, but Not Failed? A Study of Unexpected Events and Project Performance in 21 Engineering Projects, 14 Int'l J. Mgmt. Projects Bus. 1095 (2021)

3. "Navi Mumbai International Airport Likely to Take Two More Years to Complete," New Indian Express (Mumbai), Dec. 30, 2019, updated Dec. 30, 2019, https://www.newindianexpress.com/cities/mumbai/2019/Dec/30/navi-mumbai-international-airport-likely-to-take-two-more-years-to-complete-2082852.html

4. Preeja Aravind, Proposed Andhra Pradesh Greenfield Capital City Construction to Be Relaunched After 5 Years, India Today (July 15, 2025, 18:06 IST), https://www.indiatoday.in/india/andhra-pradesh/story/amaravati-proposed-andhra-pradesh-greenfield-capital-city-construction-relaunch-revival-2718268-2025-05-02

5. G.S. Subramanian, Amaravati: Chandrababu Naidu's Dream Capital Project and the Challenges It Faces, Frontline (July 12, 2024)

6. Anubha Sinha, The Delhi Metro and the Submerged Pasts of the City, The India Forum (Feb. 9, 2024), https://www.theindiaforum.in/delhi-metro-and-submerged-pasts-city

7. Noel Dempsey, Transport Infrastructure: Investment and Economic Productivity, UK Parliament: House of Commons Library (Feb. 13, 2024), https://commonslibrary.parliament.uk/research-briefings/cbp-8206/

8. Satyabrata Ghose v. Mugneeram Bangur & Co., (1954) S.C.R. 310 (India).

9. See; Coastal Andhra Power Ltd. v. Andhra Pradesh Central Power Distribution Co. Ltd., (2009) 6 SCC 659 (India); Greatship (India) Ltd. v. Commissioner of Service Tax, (2015) 38 S.T.R. 122; South East Asia Marine Eng'g & Constr. Ltd. v. Oil India Ltd., (2020) 5 SCC 164 (India). & Energy Watchdog v. Central Electricity Regulatory Comm'n, (2017) 14 SCC 80 (India).

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