Performance monitoring may be defined as an assurance role played by the government (primarily through the contract management team although other affected agencies and departments may also be involved) where assurance is obtained that the private partner has:

· Adequate systems, policies, procedures, and resources in place to perform the specific performance-related obligations set out in the PPP contract (the output specification);

The following key activities typically occur during the Construction Phase of a PPP.

• The private partner must establish itself on site and obtain the necessary permits and clearances to enable it to carry out the construction works;
• The private partner must finalize the design for the construction works;
• The construction works must be carried out; and
• The completed infrastructure must be commissioned and handed over to the operational team.

6.1.1. Project Site Set Up and Permits Clearance

Several studies show that some PPPs were cancelled during the Construction Phase due to the lack of or a poorly executed contract management function[17]. See table 7.4.

There is nothing that illustrates complexity better than the implementation of mega-projects. In this case, mega projects are PPP projects that are of high value, and are complex and lengthy by nature[15]. It can be demonstrated that a distinction among four different types of complexity helps to define mega-projects best. One is the overall project complexity, the other three are task, social, and cultural complexity. Normally, the literature has only been concerned about task complexity[16].

This is the phase during which the project finance is drawn down and the construction contractor and subcontractors engaged by the private partner begin construction, testing, and commissioning of the different components of the project according to an implementation schedule. The major responsibility related to the implementation tasks in this phase lies with the private partner. However, a management process by the government needs to be in place from the outset to ensure timely completion and satisfactory operation.

Where are We in the Process Cycle?

This part of the PPP Guide covers management of the contract during the Construction Phase of the PPP life cycle (delivery of the asset up to and including the commissioning of the asset). Therefore, all the general issues discussed previously in this chapter will apply. However, certain activities that are only relevant to the Construction Phase are discussed in more detail below. Box 7.5a and 7.5b deal with the learning objectives of this part of the PPP lifecycle.

Service performance should be monitored and measured in order to ensure that contractual compliance is achieved and demonstrated.

PPPs, by their very nature, span a very long time frame. They are detailed and complex when it comes to managing relationships between the various parties in the PPP contract. There are many stakeholders within a PPP, including the parties, lenders, SPV shareholders, end-users, regulators, legislative and executive arms of the government, and wider communities. Critically, one risk that cannot be quantified is relationship risk. This risk is more complex than many other risks.