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Contract Management

Effectively designing and tendering a PPP transaction is only the beginning of the long-term process to manage a PPP contract. Monitoring contracts and regulating prices and services are critical to ensuring that the PPP delivers value for money throughout the life-cycle of the PPP. PPPs can fail without sufficient attention to contract management.

Good contract management ensures that:

  • Services are delivered continuously and payments are made/penalties levied, in accordance with the contract
  • The government's responsibilities and risks managed carefully
  • Changes in the external environment – both risks and opportunities – are spotted and acted upon

Contract management structure

Establishing the contract management structures defines responsibilities for contract management within government, and defines how the relationship with the private party will be managed. This includes designating a PPP contract manager (or management team) within the implementing agency, as well as defining the roles of other entities within government in managing the PPP. Key steps are:

Establish the overall structure

The contract management structure should be designed during the project preparation phase to ensure that the required human and financial resources are in place ahead of contract signature.  This includes defining the agency in charge of contract monitoring and determining its responsibilities.

  • For availability-based PPPs, responsibility for contract monitoring most often falls on the implementing agency directly responsible for performance-based availability payments as set out in the contract.
  • For user-fee PPPs, contracts are sometimes overseen by regulatory bodies but often by the responsible government agency.

Designate a PPP contract manager and team

The PPP contract manager needs sufficient resources, appropriate skills and appropriate seniority

Set up systems to retain institutional knowledge

Institutional knowledge must be maintained as the management team changes over the life of the project.

Determine if there is a need for outside counsel

Where government capacity is thin (and is often is, particularly in local governments or fragile states) external advisors may be necessary to support the setup and implementation of the unit and to build capacity.  

Several other entities within government can also have roles to play in managing a PPP contract, working with the contracting authority and designated contract management team. These can include:

  • Sector regulators, which often have responsibility for monitoring service standards and managing changes in tariffs for PPP companies providing services directly to the
  • The ministry of finance is often involved, particularly where any possible changes to the contract could have a fiscal implication.
  • Central PPP units or other specialized support units may have a role in supporting the contracting authority’s contract management team.

Other actors within and outside government may also be drawn on to fulfill particular roles. For example, private contractors and end users can play a role in service monitoring. Independent expert advisors or panels are also often used to help deal with change in the PPP contract.

Contract management responsibilities

Key aspects of contract management across the implementation stages—design, construction, implementation, and project close, include:

  • Establishing contract management institutions and dedicating the right level of resources
  • Defining and establishing the responsibilities and communication mechanisms that will enable an effective relationship between the public and private partners to the contract
  • Putting into practice the mechanisms to deal with contract adjustments, dispute resolution, and contract termination, as well as deciding whether, when and how to re-negotiate
  • Monitoring contract compliance and service performance by the private party, and ensure penalties or bonuses are paid appropriate
  • Monitoring and ensuring compliance by government with its responsibilities under the contract
  • Sharing gains during project implementation
  • Managing contract expiry and asset handover

Challenges to managing PPP contracts

Managing PPP contracts differs from managing traditional government contracts that can create a number of challenges for contract managers:

  • PPP contracts require long-term commitment. Continuity in staffing and staff capacity is central to effective contract monitoring. However, achieving consistent commitment and capacity can be difficult. Without significant investment in capacity transfer and institutional memory, contract monitoring will be complicated and less ineffective.
  • PPP contracts are often complex and necessarily incomplete. Key factors such as demand and fiscal and political circumstances will not be known, despite extensive due diligence, until the project is underway.
  • Institutional oversight arrangements may cause complications. PPP contracts may be overseen by a different team or a different agency, with differing incentives to the agency that originated the project.

Learn More

    • 2014
    • Asian Development Bank (ADB), World Bank Group (WBG), Inter-American Development Bank (IDB), PPIAF

    PPP Contract Management

    PPP Reference Guide Version 2.0

    Managing PPP contracts involves monitoring and enforcing the PPP contract requirements, and managing the relationship between the public and private partners. The contract management stage spans the lifetime of the PPP agreement, from the date of contract effectiveness to the end of the contract period.  This document includes: Section 3.7 - Managing PPP contracts Section 3.7.1 - Establishing contract management structures Section 3.7.2 - Managing and monitoring PPP delivery and risk   The PPP Reference Guide presents a global overview of the diversity of approaches and experiences in the implementation of PPPs, providing an entry point to the substantial body of knowledge on PPPs that has been built up by...

    • 2014
    • European Investment Bank (EIB)

    The EPEC PPP Guide

    The European PPP Expertise Centre (EPEC) has published several versions of its Guide to Guidance over the last few years. The Guide to Guidance is principally aimed at public procuring authorities considering the use of public-private partnership (PPP) arrangements. Given the positive feedback it has received, EPEC decided to turn the Guide to Guidance into a webtool rebranded as the EPEC PPP Guide. The aim of the EPEC PPP Guide is to give users easy access to regularly updated PPP guidance and allow them to interact with the EPEC team (e.g. propose new guidance, rate the EPEC PPP Guide).  

    • 2010
    • Edward Farquharson, Clemencia Torres de Mästle, E.R. Yescombe, and Javier Encinas
    • PPIAF

    How to Engage with the Private Sector in Public-Private Partnerships in Emerging Markets

    This guide reviews the necessary steps to successfully engage and manage a public-private partnership (PPP) from the early stages. It presents a framework that highlights the requirements, options, and challenges that governments face when embarking into PPPs, and explains how to address them so that a sound PPP program can be implemented and the benefits for both public and private partners can fully materialize. This book draws on experiences from both mature and developing PPP markets across the world, and case studies illustrate the key messages throughout. It discusses the policies, processes, and institutions needed to select the right projects and then manage preparation for market and operation. It identifies the underlying...

    • 2003
    • Department of Treasury and Finance (Victoria, Australia), Infrastructure Partnerships Australia

    Contract Management Guide, Partnerships Victoria

    This Guide has been designed to guide readers to ask the right questions for their particular Partnerships Victoria project to assist them in developing and implementing suitable contract management strategies. While this Guide sets out ‘best practice’ principles relevant to the management of a Partnerships Victoria contract, it is not a variation of or substitute for the terms of the contract. It is intended to better ensure the implementation of the contract.

    • 2004
    • Government of South Africa
    • Government of South Africa

    Public-Private Partnership Manual, South Africa

    Preface and Table of Contents

    South Africa is amongst the leading countries in the world in the law, policy and systems it has established for public private partnerships. The South African National Treasury’s PPP Manual is a best practice guide for PPP practitioners. Each module of the PPP Manual is issued as a National Treasury PPP Practice Note in terms of the Public Finance Management Act, 1999 (PFMA). It should be read with Standardised PPP Provisions, issued as National Treasury PPP Practice Note Number 01 of 2004.  

    • 2004
    • Government of South Africa

    PPP Manual: Module 6: Managing the PPP Agreement (South Africa)

    • 2007
    • HM Treasury, United Kingdom

    HM Treasury - Standardisation of PFI Contracts

    • 2007
    • Government of the United Kingdom

    Operational Taskforce Note 2: Project transition guidance

    This note is designed to provide practical advice for PFI projects moving from procurement to service delivery. It is aimed at public sector project mangers (responsible for the project in procurement) and contract mangers (responsible for the project in operation).

    • 2011
    • Juan Carlos, Zevallos Ugarte

    Concesiones en el Perú: Lecciones Aprendidas (Concessions in Peru: Lessons Learned)

    • 2006
    • PPIAF

    Approaches to Private Participation in Water Services: A Toolkit

    This Toolkit assists developing country governments that are interested in using private firms to help expand access to safe water and sanitation services at reasonable cost. It also aims to assist in the design of arrangements that maximize the benefits for their countries, provinces, or municipalities.

    • 2014
    • Asian Development Bank (ADB), World Bank Group (WBG), Inter-American Development Bank (IDB), PPIAF

    Gerencia del Contrato APP

    Asociaciones Publico-Privadas: Guia de Referencia Version 2.0

    La administración de contratos de APP implica monitorear y hacer cumplir los requisitos del contrato de APP y gestionar la relación entre los socios de la parte pública y privada. La etapa de administración de contratos abarca la duración del acuerdo de la APP, desde la fecha de la efectividad del contrato hasta el  nal del periodo del contrato. La administración de contratos de APP es distinta a la administración de contratos tradicionales del Gobierno. Las APP son a largo plazo y complejas, y los contratos son necesariamente incompletos, es decir, no se pueden especi car en el contrato los requisitos y reglas en todos los escenarios.

For legal and regulatory resources go to PPPIRC

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