The relationship the Authority has with the Contractor is intended to be long term. In financial terms it may also be one of the biggest contractual relationships the Authority is involved in. It is therefore important that sufficient effort is invested, by both parties, to building and maintaining a constructive, business-like relationship. Ultimately successful projects are ones with good public/private sector relationships. It should also always be remembered that in a commercial relationship the commercial interests of the two parties can't always be the same but there is a common interest in resolving commercial disputes quickly and fairly.
It is essential that the Authority and the Contractor and, where relevant Waste Collection Authorities work hard to sustain a strong relationship throughout the Contract term. Personnel on both sides are likely to change many times during the Contract so Contract Managers should not rely on the strength of individual relationships. A healthy working relationship is characterised by trust, transparency, respect, openness, cooperation and working together to solve problems and achieve mutual goals. Some Authorities have developed project specific statements prior to Service Commencement which describes the ethos and principles which both parties will adhere to in relation to contract management.
Key aspects of a good working relationship include:
• understanding and respect for each party's objectives and point of view; including the Contractor's need to make a profit and develop new business;
• shared knowledge and objectives;
• sound knowledge of the Contract and contractual documents;
• good flow of information and open channels of communication;
• a wish to work together to resolve issues with support from all levels within the organisations;
• good decision making processes;
• trust between parties; and
• desire for the project to succeed.
Concerns about the relationship should always be discussed openly to avoid problems becoming more serious over time. A key relationship is between the public and private sector contract managers. If this relationship does not appear to be constructive, then both parties should consider whether a change of personnel is necessary.
Setting out clear roles and responsibilities will ensure that individuals will have the appropriate level of responsibility to carry out their roles effectively. The issue and escalation paths should also be understood and used so that issues are resolved before resorting to formal dispute resolution. The relationships between all parties should, at the very minimum, allow for an understanding of the importance of project performance and not compromise the contractual rights and responsibilities. However an excessively rigid approach can also be counter-productive and it should be noted that Contractors can and do go beyond the requirements of the Contract as an investment in the relationship (e.g. by sponsoring events, sharing know how and providing benefits for the local communities etc).
Good communication is essential for effective contract management. A review in 2006 of operational projects11 found a positive correlation between regular communication and satisfaction with the project. Degrees of formality in dealing with issues will vary depending on the nature of the issue and its impact upon the project. Care should be taken to document verbal communications when it is necessary to keep a record. If required the record should be comprehensive and formally approved by both parties.
To facilitate communication it can be worth considering the following options for promoting a close working relationship:
• co-location of teams for example on the site of the major waste treatment facility (as is the case in the Leicester City PFI Contract);
• joint training events;
• externally facilitated team building workshops;
• joint innovation workshops;
• use of IT (see Section 7.3); and
• shared events (subject to the need to avoid, and to be seen to avoid, at all times, any Prohibited Act (see Section 8.9.2)).
The Authority must, however, remain clear about the dividing line between a close working relationship and one where the Authority's Contract Management Team is providing insufficient challenge to the Contractor. It is important, for example, that where the Payment Mechanism provides for a deduction or a reduction in the Base Payment that the contractual position is enforced as this gives a clear message about how poor performance will be dealt with and it avoids setting a precedent that may be difficult to break later.
As it entails a close and long term working relationship, a waste PFI/PPP contract could be construed as implying a particular legal relationship that was not the intention of the parties. For the avoidance of doubt the WIDP Contract (Clause 94) states that it does not constitute:
a) a partnership;
b) a contract of employment; or
c) an agreement for the Contractor to be an agent of the Authority.