H.2.2  Effective contract management manages risk

To be effective in the context of a PPP project, contract management must identify, monitor and manage all risks over the life of the project contract to achieve project objectives and value for money outcomes. This includes:

•  quantifying actual and potential risks and their associated losses (or benefits) to identify those risks that must be managed over the contract lifecycle; and

•  developing management strategies to assume, control, mitigate or eliminate these risks or losses.

Contract management builds on the allocation of project risk in the contract. The framework for this risk allocation in PPP projects is set out in the risk allocation guidance material.

From time to time, the private party in a PPP project will approach the government party with proposals for changes to the contract or new opportunities that they believe will lead to mutual benefits. Effective contract management also helps the government party to assess and realise the benefits of these proposals.