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PPP contract management systems

Business
The establishment of contract management systems for public-private partnerships is necessary to achieve sustained and smooth implementation of the project.

The establishment of contract management systems for public-private partnerships is necessary to achieve sustained and smooth implementation of the project. The systems should be designed in anticipation of possible circumstances that are likely to arise during the project duration. Contract management systems should have the capacity to manage all circumstances including the unexpected. Such systems should be available for the support of the project that include the harmonisation and synchronisation of parties’ expectations embodied in the contract.

PURCHASING & SUPPLY: NYASHA CHIZU

Many systems for managing the implementation of PPPs ignore the critical stage of design and implementation. This is worsened by the prolonged duration of such projects where most public institutions lack capacity to effectively manage the project. Like all other projects, issues of adherence to minimum quality standards are pertinent. The systems must be in place to regularly monitor the project output and service standards. The aim is to ensure that the private sector in infrastructure projects, meets the quality standards to enable the public sector to receive after the end of the project life, a project with meaningful shelf life. This element, apart from the consideration of the state of the infrastructure at the end of the project life, provides immediate benefit by ensuring better service delivery and achievement of value for money.

Most PPP contracts in the majority of countries implementing them address the need to monitor the projects during implementation. They provide for monitoring through the establishment of special teams that may include the audit, engineering and procurement professionals. This team’s role is to periodically gather information about the performance of the project. This eliminates the existence of errors associated with the quality of materials for example materials used on the Plumtree-Mutare Highway where the tarmac shifts, creating humps when the weather is hot.

The systems for monitoring PPP contracts must specify that the private sector partner provides periodic operational and financial data. The procuring entity must periodically gather information on the performance of the PPP contract. There must be risk mitigating measures in place and the PPP project performance information must be available to the public.

Renegotiation or modification of PPP contracts is common given the prolonged period of implementation. This is also a risk management strategy that recognises that since risk is a dynamic concept, contract management must evolve with the delivery of the contracted service during the project lifecycle. Most PPP contracts provide for adjustments to allow for flexibility to facilitate rectification of unforeseen changes in circumstances. This provision for remodelling or renegotiation is only necessitated by changes that were unforeseen on the project. They are meant to avert a possible disruption on a project and must not be abused to frustrate, in any way, well-meaning projects by rowdy elements.

The term renegotiation refers and relates to situations when there are changes in the contractual provisions that cannot be addressed through adjustment provisions of such contracts. The renegotiation is aimed at benefiting the project positively for both parties since it is meant to address intrinsically the imperfect nature of the PPP contract. Such provisions are never provided for squeezing the private sector party, but to correct a critical element of the project so that both parties benefit from such a correction. Renegotiation needs to be minimised or avoided where possible since it is, in most instances, used as an opportunist tool that leads to negative consequences. If not managed, renegotiation of a PPP contract may affect the contract in a way that renders it materially different in character.

Systems for PPP contract project management must be adequate to manage monitoring and evaluation as well as project renegotiation. The systems for renegotiation must provide for approval of such activities by the PPP unit of a country to minimise abuse within the procuring entity. It further restricts the scope of the renegotiation and the risk allocation changes.

The issues raised are critical if the PPP contracts are going to be used to improve the life of the general citizenry.

Nyasha Chizu is a fellow of the Chartered Institute of Procurement and Supply writing in his personal capacity. Feedback: [email protected] Skype: nyasha.chizu