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Strategy Delivery and Commissioning

72. Definition of Contract Management in PPPs

The objective of PPP contract management is to obtain the services specified in the output specifications and ensure ongoing affordability, Value for Money (VfM) and appropriate management of risk transfer.

PPP contract management is the process that enables both parties in a contract to meet their respective obligations in order to deliver the objectives required from the PPP contract. Once the contract has been signed, and the “deal” has been agreed, each party should perform its respective role. Effective contract management requires a good working relationship between the two parties, and it should continue throughout the project term[1].

A second dimension of PPP contract management is proactive management to anticipate future needs, as well as the requirement to react appropriately to unforeseen situations that arise. PPP contract management seeks to achieve continuous improvement in performance over the life of the PPP contract.

For the purposes of this PPP Guide, PPP contract management is applied from contract signature until hand-over.

Effective contract management requires a number of activities which fall outside the purview of the PPP contract, but are essential to the success of the project. These include the following activities:

· Addressing the various needs, concerns, and expectations of the stakeholders in executing the project;

· Establishing, maintaining, and carrying out stakeholder communications that are active, effective, and collaborative by nature;

· Managing stakeholders efforts in meeting project requirements;

· Communicating project deliverables to these stakeholders in a way that improves their buy-in to the project; and

From a private partner management perspective, good practice in PPP contract management requires the balancing of the competing project constraints which include scope, quality, schedule, budget, resources, and risks.

The specific project characteristics and circumstances can influence the constraints on which the contract management teams of both the government and private partner need to focus. The relationship among these factors is such that if any one factor changes, at least one other factor is likely to be affected. Box 7.2 provides examples of such circumstances.


BOX 7.1: Examples of a Relationship between Project Constraints and Outcomes

If the schedule is shortened, often the budget needs to be increased to add additional resources to complete the same amount of work in less time. If a budget increase is not possible, the scope or targeted quality may be reduced to deliver the required end result of the project in less time and within the same amount budgeted.

If the commencement of construction is delayed by unseasonable rain (but not such that a force majeure event or relief event is triggered), the public sector contract manager needs to understand that this may result in late completion of construction, or the private sector may incur additional expenditure in order accelerate construction and make up for the lost time. In this case, the public sector contract manager should be aware of a greater risk of financial stress for the private partner. Alternatively, the construction contractor may seek some recourse through relief or compensation regimes, in which case the public sector contract manager should be aware of the correct application of the contractual provisions related to these regimes.

Project stakeholders may have differing ideas as to which of the project objectives are the most important, which presents an even greater challenge. Changing the project requirements or objectives may create additional risks. The project team needs to be able to assess the situation, balance the demands, and maintain proactive communication with stakeholders in order to deliver a successful project[2]


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