Early termination of a PPP contract is truly a last resort and must follow a whole range of processes, commencing with an act of default by one of the parties or some continuing force majeure.

From a contract management perspective, the focus should be on avoiding termination by managing performance adequately, identifying and mitigating risks that might lead to a default, dealing with defaults in good time and in accordance with the PPP contract, and managing disputes in accordance with the Dispute Resolution Process (DRP).

8.1. Effective Relationship Management

Variation management is closely connected with PPP agreement management and relates to the creation of mechanisms to enable changes to the PPP agreement. Such changes may be necessary as a result of a change in circumstances that could not be anticipated or quantified when the PPP agreement was signed. Variations may involve changes to works, services or the form of delivery.

The four main categories of variation types include:

6.1. Standard Regulations when Dealing with PPPs

As discussed in chapter 2 of the PPP Guide, most jurisdictions have a regulatory framework that is applicable to PPPs in general as well as PPP contracts for specific projects. The regulatory framework has a number of objectives, one of which is to permit the government to consider and make rational choices as to which projects to implement as PPPs.

5.1. Payment Mechanisms

The mechanism by which the private partner receives revenue with which it covers its costs, services its debt obligations, and generates a profit must be linked to the performance of its obligations under the PPP contract. The very heart of risk transfer and, therefore, Value for Money lies in the degree to which the private partner is incentivized to deliver the required services so as to receive the maximum amount of revenue.

As in the Construction Phase, during the Operations Phase, the immediate mechanism to deal with non-compliance and contract breaches is typically a mechanism that has financial consequences for the private partner. However, the system and instruments for managing under-performance (by providing incentives for performance as required by the contract) have a higher complexity in this phase than during construction, as a wide and complex set of service requirements must now be monitored.

3.1. Introduction to Contract Management during the Operations Phase

During the Operations Phase, key activities that must be included in managing the PPP contract are: monitoring and managing project delivery and performance against service outputs; monitoring and managing changes; managing disputes; and managing handover processes at the end of the contract.

2.1. Importance of Contract Management and Monitoring