Navigating Large Infrastructure Projects: Best Practices and Principles

For developing nations, what critical role do lawyers play in ensuring the success of large infrastructure projects?

November 22, 2024

"...it is our job as lawyers to dig deeply into the details of a project, understand the risks involved in each contractual term, and assist the client in making hard decisions."  Brian D. Fix, President - Negotiating Practical Solutions, LLC

Like many African countries, Kenya is experiencing unprecedented investments in large infrastructure projects. The aspiration of transforming rural areas into modern communities has resulted, to a large extent, in mismanaged large infrastructure projects, unfulfilled promises, and massive debt due to continued cycles of borrowing to complete existing projects. How, then, from such entrenched detrimental practices, do we forge ahead?

Brian D. Fix, a Columbia Law School alumni, proposed a blend of meticulous planning, strategic negotiation, and effective risk management in a seminar co-organized by the Center and Law Society Kenya for more than 400 lawyers. Fix pointed out that lawyers play a vital role in ensuring the success of large infrastructure projects. He emphasized critical questions that lawyers should focus on while reviewing these projects, including:  

  • Technical: Will the project work and deliver what has been promised?
  • Social: Will it achieve its development objectives? Will the intended beneficiaries be satisfied?
  • Financial: Is the project bankable, with acceptable risks accepted by each side?
  • Legal: Do those agreements accurately reflect the respective rights and obligations of the parties? Second, can those obligations be performed consistent with Kenyan law?

In an engaging discussion that inspired over 50 insightful questions from participants, including managing projects that may not fully align with the public interest and how to ensure projects are beneficial to citizens, Brian D. Fix facilitated a practical conversation that highlighted several important points, including:

Defining Project Parameters: The Foundation of Success

One of the first and most important steps in managing an infrastructure project is clearly defining its parameters. For instance, when setting up a new hospital, it is essential to address key questions such as how many beds will be needed, the number of operating rooms required, the training facilities for staff, and the specific medical equipment necessary. Answering these questions upfront helps avoid ambiguity and ensures that all stakeholders, particularly the Ministry of Health, understand the project's scope. Conducting thorough needs assessments is crucial to this process. Consulting with experts, such as engineers, health specialists, and architects, can provide valuable insights and help ensure the project's requirements are well-defined and achievable.

Maintaining Local Control: Empowering Kenyan Managers

Maintaining control within the local context is a crucial aspect of project management. Foreign contractors often propose standardized designs from other countries that may not meet local needs. Therefore, Kenyan negotiators must be involved in important decisions about the project's design, construction, and management. The project can be tailored to meet local requirements and managed more effectively by securing approval rights and ensuring active participation from local stakeholders.

Structuring Negotiations: The Power of a Term Sheet

A well-structured negotiation framework is vital to a successful project. Utilizing a term sheet—a document that outlines the essential obligations of all involved parties—can streamline the negotiation process. This sheet should be concise, typically structured in three columns: the title, a list of obligations, and notes on potential risks or questions. A clear and detailed term sheet acts as a foundational document, guiding all subsequent negotiations and ensuring everyone is on the same page.

Navigating Legal Issues: Change and Dispute Resolution

Legal issues such as changes in laws or ownership can significantly impact an infrastructure project. Including provisions that address changes in circumstances ensures that the project can adapt to new regulations or shifts in ownership. Additionally, having clear dispute resolution mechanisms, such as arbitration clauses, helps handle conflicts efficiently and keeps the project on track.