Asset condition at expiry of the PPP contract

The PPP contract should contain provisions to ensure that the assets are "handed back"10 to the Authority in good condition. For example, the contract could include: Guidance 108, 110

• indicators of the condition the assets must be in at contract expiry (e.g. expected useful life left for each type of asset, ability to meet certain performance tests);

• a third party assessment of the condition of the assets and of the works to be completed to meet the required standards (such assessment should be carried out by an independent expert sufficiently in advance of the expiry date);

• retentions made from the service fee over a defined period prior to expiry (the proceeds being held as a guarantee in a reserve account); and

• verification by an independent expert that the works required to meet the hand-back conditions have been completed satisfactorily (this could also trigger the release of the retention sums to the PPP Company).

CHECKLIST: Contract management
		During the operational phase of a PPP project, the focus of the Authority is to manage the contract while maintaining operational performance. To achieve this, the Authority and its team of advisers need to consider the items in the following checklist:
		Has the possibility of engaging the same advisers employed in the procurement phase been considered (availability, potential engagement, required budget and conflict of interest)?

		Have experienced advisers been consulted to help the contract management team address sensitive changes to the PPP contract, including refinancing?

		Has a contract administration manual been developed to help coordinate information on contract terms with contract management procedures, including the allocation of responsibilities and timetables?

		Have guidelines been developed for users of the contract administration manual to help monitor contract performance in case this is envisaged?

		In availability-based PPPs, are payments to the PPP Company processed properly and in accordance with the PPP contract?

		Have all necessary steps been taken to ensure continuing review and monitoring of project risks using, for example, the risk register developed during the detailed preparation phase?

		In the event of changes to the PPP contract, what steps are envisaged to maintain monitoring of operational performance and not simply concentrate on managing changes to the contract? In particular, what mechanism has been developed to ensure that value for money is maintained after the changes if risks are transferred from the PPP Company back to the Authority?

		Have criteria and procedures been agreed to monitor the residual value of the PPP assets so that the asset management and maintenance practices support the PPP project objectives and maximise value for money?

		Has a communication strategy been developed to provide the PPP Company, users and other relevant stakeholders with regular reviews and updates?

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10 Where the legal ownership of the assets stays with the public sector throughout the life of the PPP contract, only the rights to use the assets are handed back.