If departments rigorously apply the four elements for successful project initiation outlined above, managing execution effectively will depend on whether the detailed project arrangements can respond to inevitable changes. Experience of PFI illustrates the effects of not doing so with significant cost escalation due to contract variation during the life of the contracts.22
Specific evidence we look for includes whether the commercial and governance arrangements allow enough flexibility to recover the integrity of the project in the light of unanticipated events or significant variations from the original plan as uncertainties or risks crystallise. A strong contract with appropriate break points will incentivise good supplier performance and positive behaviours whilst protecting both contracting parties.23 Negotiating the inevitable changes on contracts will be more effective where there are "open-book" arrangements which ensure both parties have a full and realistic common understanding of risks, underpinned by robust and up-to-date performance information.
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22 Making Changes in Operational PFI Contracts (HC 205, 2007-08).
23 The Failure of Metronet (HC 512, 2008-09) and London Underground PPP: Were they Good Deals? (HC 645, 2003-04).