The essential role of governance in project development

The business climate is increasingly characterised by corporate and project development activities which often claim to be innovative, offering best practice and focusing in some way on exploiting the value chain. Effective governance is less frequently mentioned, possibly being taken for granted as an essential but unexciting form of compliance. Infrastructure development projects often combine public and private sector interests through contractual arrangements. These are considered at project level generally within the framework of project financing, that is projects with a capital structure employing significant debt secured against the project assets and revenues. A practical example of the requirement for detailed and comprehensive contractual arrangements is shown using the contractual structure necessary to develop an energy from waste (EfW) project. This example is used to illustrate how a number of strategic business models may evaluate project viability and risk. The paper concludes that the advantages of structuring projects in this way, primarily transferring project risk and funding requirements to the private sector while also benefiting from private sector best practice, are only available to projects which are subject to extensive scrutiny and control – in other words effective governance.