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Effective management needed to unlock PPP value: report

Governments must monitor the obligations of private sector operators and ensure that scope changes are managed


July 23, 2018
Purchasing B2B

SYDNEY—Stronger public sector oversight and contract management are essential to realizing the true value of investment through public private partnerships (PPPs), according to new guidance from the Global Infrastructure Hub.

The G20 initiative today launched its Public Private Partnership (PPP) Contract Management Tool—a free online resource that provides guidance for public officials in charge of managing PPP infrastructure projects after financial close, through construction and operations.

CEO of the Global Infrastructure Hub, Chris Heathcote, said that governments need to focus on the importance of managing PPP infrastructure projects to ensure that the public is receiving the full benefit of the infrastructure services.

“A great deal of attention is paid to the preparation, procurement and negotiation processes of PPPs,” Heathcote said. “However, this is only the start of delivering a successful project, and in many ways the hard work begins after financial close. Simply signing a PPP contract and letting it run its course will not automatically lead to the private sector delivering the public service to the level of quality expected, and has the potential to undermine the entire process of project preparation and procurement.”

Governments need to monitor the obligations of a private sector operator and ensure that scope changes are managed effectively to ensure value for money and minimize the risk of disputes, according to the Global Infrastructure Hub. Governments also need to ensure that community stakeholders are consulted in relation to disruptions through construction and operations.

The aim of the PPP Contract Management Tool is to help government officials address these types of challenges and prevent potential setbacks and disruptions throughout the construction and operations phases of a project.

Heathcote stressed that procuring authorities need to ensure PPP contract management teams are well-resourced, and that adequate training is provided to the officials responsible for handling both day-to-day management issues, and the significant challenges that can arise, such as requests for renegotiation.

“Our research finds that up to 48 per cent of PPP contracts globally are renegotiated within the first 12 years. The key issues associated with renegotiation are that they don’t typically benefit from a competitive tender process and often lack transparency. “It’s important that the government’s contract management team has the capacity and resources required to successfully manage a renegotiation.”

The Global Infrastructure Hub tool, which has been created with global professional services consultancy Turner & Townsend, provides practical guidance to increase the quality of PPP infrastructure investments internationally.

 

The project has been informed by an in-depth interrogation of 250 infrastructure PPPs reaching financial close between 2005 and 2015 to understand their successes and challenges. The research program included three global workshops with government participants from over 30 countries, as well as multilateral development banks.