Session10_ContractManagementRegulation

8/7/2019 Session10_ContractManagementRegulation

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Contract Management

and Regulation

Vickram Cuttaree

The World Bank

St. Petersburg May 24, 2008


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What is PPP Agreement Management?

is the process that enables both

parties to a contract

to meet their respective obligations in order to deliverthe objectives

required from the PPP agreement.

is a partnership between theinstitution and the private party.


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What is the objective?

Obtain the services specified in the outputspecifications and ensure ongoing affordability,

value for money and appropriate risk transfer


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Contract Management begins at inception

with the appointment of project

manager and team

with development of projectsoutputs, benchmarks and risk

allocation

with an understanding that things

will change down the road

Success depends on planning, good monitoring and flexibility from all

parties involved


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Key PPP Agreement Management Functions

Corporate governance

Relationship assessment Dispute resolution

Risk management

Performancemanagement

Variation management

Contract maintenance Financial administration

Partnership

Management

Service

DeliveryManagement

Contract

Administration


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Partnership Management


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Dont go in .

without an Exit

strategy.


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Exit strategy needs to be updated regularly

What happens aftercontract expires? Service continues?

By whom?

Transfer of assets In the case of NADEX: concessionaire willrenew rolling-stock and value of total assets atend of concession is not negligible

Is the City prepared to takeover?

Does the City have capacity? Final project assessment Deliverables and outputs

Employee transfers


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Pushing the escape button is the last option

What happens before contract termination?

Decisions should take into consideration the allstakeholders of the Public-Private Partnership VfM/Affordability for Government/City

Availability/Quality/Affordability of service for users Profit/return for the private party

Win-win situation with no losers Importance of respecting contracts: attitude towards

contract with private partnerwill have an importantimpact on perceive risks and attractiveness/cost of

subsequent projects Contract renegotiations: good preparation minimizes risk

of re-negotiations but it can be justified and does happen

Dispute resolution mechanism should be put in placeand be satisfactory for both the public and privatepartner


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Service Delivery Management


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Risk management is an iterative process

Expect the unexpected duringimplementation phase Who does what?

How?

By when?

Example: what happens if increasing costsmeans concessionaire is enable to operateNADEX under current agreement?

Institutions priorities and relativeimportance of risks will shift and change Revisit and reconsider on regular basis

Ensure appropriate risk transfer throughout


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Carrot or stick?

Each PPP is unique Construction vs. operations

WHSD and Orlovski mainly about construction

NADEXs operation is a key determinant of success

Length of contract Flow of funds between public and private

sector (availability payments, concession fees,etc)

All require periodic monitoring What: level of performance How: quality control

If: consequences

Who: self, institution, independent party


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Contract Administration


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Contract Administration

EstablishAdministrative processes to ensure that allthe procedures and documentation relating to the

PPP Agreement are effectively managed


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Systems, processes and procedures

Implications on service delivery

How variations of PPP agreement are going to bemanaged? Who should approve variation in agreement

What type of variation will be considered (change inschedule for NADEX, maintenance program, etc)

How to assess the impact on users, VfM, affordability

Financial administration Keep records and accounts

Importance of preparing and updating regularly amanagement plan and manual


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Can you see the future?


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One word on sector policy and regulation

PPP projects can be very much impacted by newlaws and regulations governing the sector

While it is understood that Government/City mustkeep control over future policies

Impact on current operators should be assessed (newroad, new tariffs for metro, etc)

Solution might involve compensating the privateoperator from missing revenue

Quality of regulation and clarity of policies willreassure the private sector and ultimately benefit

the project, sector and City Risk that city perceived risk could increase

Future projects will likely attract less interest orwill bemore expensive for the City


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And a last one on Institutional Memory and

Resources

Issues during operation can often be linked tocontract design, and the preparation phase

Contract Monitoring and Regulation is complex and

time consuming

Close Monitoring is essential for the life of thecontract (often as long as 30 years)

Importance of institutional memory: ensure people

and institution involved in preparation andprocurement remain involved in monitoring

Importance ofhuman & financial resources: ensure

that enough financial resources are dedicated to

monitoring contracts and that people with the right

skills are involved


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Contract Management and Regulation

THANK YOU !!!

Vickram Cuttaree

The World Bank

[email protected]

Documents

Session10_ContractManagementRegulation