The need for resilient, sustainable and new infrastructure is on the rise globally. Executives around the world are concerned about the adequacy and existence of infrastructure. Availability of infrastructure is a critical issue for business as it impacts on operating costs and it becomes a major factor in strategic planning and decision making. The long term outlook for the businesses does not look bright as 77% of the surveyed participants by the Economics Intelligence Unit on behalf of KPMG International[1] are concerned that current plans and investments in infrastructure are not sufficient to support long-term growth of business.
Poor or inadequate transportation facilities, poor energy infrastructure driving the energy costs and delivery of poor social services due to difficulty in operating old and neglected infrastructure places drastic pressure on Public Sector to deliver on all these challenges. In turn, Governments are looking to find new and more effective ways to improve vital infrastructure through private financing and Public Private Partnerships.
Governments’ excitement of providing infrastructure through PPPs is short-lived. During the feasibility study and procurement period of the PPPs the input of effort into the process by Government is admirable, however the same efforts diminish and are not maintained once the ink is dry on the contract.
At the very start of the construction phase the Governments behave as if the entire project has been completed when in fact all that has been set are the rules of the engagement. So what does happen once the contract is signed?
Usually, expensively negotiated contracts are gathering dust at the official’s bottom drawers while the public sector contractual rights are being unused, locking the full value and excellent service due. This phenomenon is greatly supported by the Governments' inability to recognise the contract management importance and associated disciplines that are needed to deliver the successful project during the commissioning and operating phase.
The statistics show that 66% of sampled PFI contract managers devoted half of their time to managing the contract and 42% of the contracts sampled had failed to levy any performance deductions in the past (Ipsos MORI survey, 2008)[2]. There are several possible reasons for such low findings. These can be categorised as contract management being undermined by the owners of the project thereby under-resourcing contract management function, contract managers not having the right skills and therefore often unaware of their rights under the contract, the attitude of “know it all” by contract managers when it comes to service management jeopardises the contract and project by ignoring the valid details of the contract when unlocking the value, and disillusionment of the contract managers that by levying deductions actually serves to worsen performance and trading deductions for other services brings value to the project when in fact it diminishes that very same point.
Therefore, the issue of “excellence in theory” (a great feasibility study) versus “not really project that is delivering” (commissioning and operating phase) can be bridged by simply applying good contract management to PPPs.
APMG International will be launching a PPP certification scheme in partnership with the World Bank Group in early 2016, to improve performance of PPP practitioners across all aspects of PPPs. As one of the major themes emphasised in the scheme, contract management will be one of the topics that will give great insight of how proper implementation of contract management is imperative to the success of the PPPs.
[1] KPMG International (2009), Bridging The Global Infrastructure Gap: Views From The Executive Suite conducted in cooperation with the Economist Intelligence Unit https://www.kpmg.com/dutchcaribbean/en/Documents/Publications/Bridgingth...
[2] Ipsos MORI 2009, Investigations the performance of operational PFI contracts: A research study conducted for Partnerships UK on behalf of HM Treasury
Irina is a qualified Quantity Surveyor and holds a Master’s Degree in Building specializing in various Infrastructure Procurement Methods. She has more than 15 years of experience working with both Public and Private sector on various Infrastructure initiatives. Currently, Irina is with Deloitte South Africa, leading Corporate Finance Infrastructure Capital Project Team.
Irina has completed various consulting assignments mostly at National and Provincial Government levels specifically development of infrastructure on PPPs within transport, healthcare and commercial buildings. As a result she is familiar with various vehicles, which could be used in alternative service delivery, be it by National, Provincial or Local Government.
Currently, Irina is developing a methodology for Project Management of existing and operating PPPs which will assist government officials in successful delivery, as well as provide a tool for managing the PPP inception for both Transaction Advisors and government officials. She has been involved in projects of monitoring nature such as Gautrain, as well as assisting clients in the public sector with monitoring and assurance of the adjudication of tenders over R 30bn in value.