Traditionally, the use of performance management systems across the public sector has not been widespread and concerns have been expressed about their limited application (Management Advisory Board, Management Improvement Advisory Committee 1993). More recently, pressure has been mounting on governments (Hoque 2008), including those in Australia (Heinrich 2008) to embrace better performance management practices.
According to the Queensland Government's Department of Public Works, managing and monitoring suppler performance is necessary for assessing VfM outcomes (2000: p.2). In its purchasing guide (2000: p.3), the Department states that the purpose of effective contract management is to:
"[ensure] that the contracted goods and / or services are delivered in accordance with the specification and the terms of the contract, that all associated risks are identified and managed and that effective communication is maintained between all parties."
Performance management and monitoring practices should contribute towards the effective management of risk, the development of strategic relationships with its contractors as well as improving provider capability and their service delivery efforts (Department of Public Works 2000: p.2). Furthermore, the Department emphasises the importance of aligning the level of performance monitoring with the risks involved in delivering services. Contract managers should progressively anticipate, identify and facilitate potential or actual service shortfalls before supplier relationships are damaged and before VfM propositions are compromised (Department of Public Works 2000: p.5).
Performance management is an essential feature of these types of PPP agreements. Thus, performance systems should be used as a tool to ensure that the concessionaire is performing its contracted obligations and to give the government an understanding of sustainability of contract (Partnerships Victoria 2003a: p.47). This is because the continuous achievement of performance targets by operators can be a reliable indicator that PPP objectives will be met. By evaluating outputs (and outcomes), the public partner can take necessary and timely action to address under-performance (Forrer et al 2010; National Audit Office 2007: p.7) or non-performance.
A limitation for this research has been the inability to obtain much meaningful PPP operational data. Two reasons for this are acknowledged. The first relates to PPP as a form of procurement - PPP is relatively new compared with other forms of public service delivery and infrastructure asset acquisition. Only a limited number of projects have yet reached operational maturity either in Australia or overseas. It can therefore be difficult to develop a benchmark to determine how successful PPP actually is against more traditional forms of procurement. The second reason, and perhaps more pertinent for this research, is that performance data for individual projects is almost entirely protected by 'commercial in confidence' arrangements. This means that raw data tends to be unavailable for public consumption (as well as other sensitive information such as cost structures, profit margins and that which is protected under intellectual property agreements).
There has been wide-ranging criticism of 'commercial in confidence' practices from a number of concerned PPP stakeholders ranging from the media (Davidson 2007); academics (Yuan et al 2009); to the Auditor-General for Australia (Barrett 2003: p.38). However from the viewpoint of this research, the limitation means that there is a lack of industry and academic studies to cite in the exposition of the establishment and application of performance management principles. Nevertheless, issues that have been identified from this literature review on performance management are: KPI modification, availability of performance data, contract management and the application of penalties / abatement. Each is discussed separately.