To avoid ambiguous operational outcomes, service standards should be drafted with clear outputs that can be objectively identified and measured. It helps to engage in a consultative process with each of the shortlisted proponents in the development of detailed contractual specifications. (The process for consulting with proponents during the Binding Bid stage is outlined in section 5 of the framework Document.) In addition, operation contracts may be written for shorter terms. This enables government to update and adjust service standards to better reflect its requirements.
As a corollary, and as appropriate, the technology involved in service delivery should be state-of-the-art, with options for upgrading as the contract term proceeds. This enables the private party to adopt new and more cost-effective operating processes while mitigating the extra costs of an upgrade, and will facilitate continued service delivery to the requisite standard (including adjusted standards). In the interests of operational efficiency, and as appropriate, it is important to incentivise the private party to incorporate the latest technology at the outset of the project by allocating to it the risk of technological upgrade and obsolescence. This is easier to achieve if, as is generally the case in public private partnership projects, one party has ultimate liability to government for both design and operation. In these circumstances, the private party has a vested interest in ensuring the design allows for the most efficient/cheapest operating outcome.
If government shares part of the operational risk because of its potential intervention or of potential impact of changes in its provision of core services on the private party's contracted service, then the nature and extent of the risk should be clearly identified and quantified. There should be consultation with the private party regarding the difficulties that may arise at the interface between government-provided services and those provided by private parties, with agreement to forewarn the other party of any proposed operational change and to consult as to its impact. (These matters are addressed more fully in the context of network and interface risk, chapter 9.)
If the project agreements are breached and the private party is not highly capitalised, the sponsor(s) may seek to walk away, limiting government's ability to obtain redress. To protect government's interest in service continuity, and to compensate it if the sponsor seeks to walk away from the contract rather than rectify operational deficiencies, operating guarantees or performance bonds may be required from the sponsor or the private party's parent companies (where they differ from the sponsors).