To achieve Value-for-Money (VfM) outcomes during operational phases of Public Private Partnerships (PPPs), contract oversight must be prudently managed by the public partner. Although it is the responsibility of the private partner to deliver agreed services, the public partner is ultimately responsible for ensuring that these services are actually carried out and that they (at least) meet minimum standards. As no contract will cover every eventuality of something going wrong, effective partnership relations between the public and private partners are important for dealing with unforeseen performance issues as and when they arise.
Other types of uncertainty are inherent in PPP. Uncertainty is associated with risk. For the public partner, one of the main benefits sought from PPP is risk transfer - or more explicit allocation of risks between the public and private partners; however, not all risks can be transferred during operations. Therefore, governments should accept and manage their risk positions. PPP are also expected to deliver real benefits to communities throughout their operational performance. The public partner should be pro-active in taking necessary and timely corrective action to encourage better operator (private partner) performance when necessary to ensure that planned social outcomes are achieved in practice. Thus, the active management of partnership, risk and performance by the public partner during the operational phase of PPPs is crucial.
This research has two main objectives. The first is to examine how PPP operational phase partnership, risk and performance management practices can be improved to achieve better VfM outcomes. This involves developing a generic conceptual integrating model, intended to assist government decision-makers to allocate and make better use of public sector resources during the operational phase of PPPs, that may have significant and / or long-term consequences for achieving strategic objectives using an integrated partnership, risk and performance management approach. The second objective is to test the logic and sufficiency of the model by exposing it to industry practitioner review and comment.
The underlying research methodology is phenomenology, and divides into two main phases using qualitative mixed methods commencing with literature review to facilitate the initial conceptualisation of the proposed model. Semi-structured interviews were then used to gather the data required for development. A second iteration of the model was presented to an expert focus group for scrutiny and comment, and feedback from this group was used to refine the third and final iteration of the model.
The research sample was drawn from eligible persons from the Australian Government, three Australian state jurisdictions, the Government of the United Kingdom, as well as selected private sector participants. Fifty invitations were distributed and 34 people agreed to participate in the formal interview process. Twenty-three participants were from the public sector and 11 were from the private sector. Seven respondents took part in a second interview involving a different management discipline i.e. partnership, risk or performance management, bringing the total to 38 interviews (three interviews involved interviewing two participants at the same time and one of these respondents took part in a second interview). Many of these participants have substantial experience working in Australian and international PPP markets. Ten public sector PPP experts (selected from the research sample) were then contacted to elicit their interest in taking part in a focus group. Of the 10 contacts, seven respondents agreed to participate.
The most significant findings for this research are two-fold. First, there is a link between the public partner's contract management style for achieving VfM and organisational culture i.e. 'give and take' relationship management and 'black letter' contract enforcement. The give and take-type approach accords with a culture that places a premium on quality of the contract management function as well as embracing a solutions-based approach fostered through a strong belief in the value of relationship management. This contrasts with a black letter approach which is likely to manifest in a strong compliance-orientated culture. Organisational culture, however, is not always driven by the preferred contract management style of the public partner: 'you get what you pay for'. This suggests public partner's decision-making can be influenced by the size of the private partner's financial margins, which could then influence the extent to which the concessionaire may 'go the extra mile', or alternatively, the degree to which 'corners could be cut' by the operator.
Second, sufficiently skilled and experienced public partner employees are critical for achieving VfM outcomes. This research demonstrates that over-reliance on expensive contractors and consultants; failure of public employees to understand the commercial and legal underpinnings of the concession deed; ineffective knowledge management practices; inadequate succession planning; and poor communication may all undermine value for the state over the longer-term or lead to an adverse change in the public partner's risk profile. Therefore, failure of governments to attract and retain high calibre employees can have a detrimental effect on achieving desired outcomes.
This research contributes to the advancement of the 'body of knowledge', with respect to public partner governance of PPP in the operating phase. This includes: identifying critical success factors that lead to the achievement of VfM outcomes, thus building upon existing partnership, risk and performance management knowledge, policy and guidance for PPPs; and developing an Integrated Management Model as a tool - that supports the contract administration manual - to enhance the development of internal and external improvement plans as well as improving the operational management of partnership, risk and performance elements.