Pertinent issues relating to partnership, risk and performance management have been identified in the preceding theory and case study chapters. These matters have the potential to hinder or prevent the achievement of VfM outcomes during the operating phase of PPPs from a public partner perspective. The issues are informed by the research questions which identify the essential context and content of the research problem.
The literature review (Chapters 3 and 4) draws upon material in the form of secondary data that outline the key issues. This information is supplemented with case studies (Chapter 5), selected to explore and confirm the presence of the issues in real PPPs. Table 6.1 contains a summary of the issues identified and this is used to guide the research design.
Table 6.1 Issues Relating to Partnership, Risk and Performance Management in PPP.
Management element | Issues identified | Literature and case study issue sources | Sub-issues | Relevant case study issues |
Partnership | Organisational culture | - HM Treasury (2011) - Forrer et al (2010) - Weihe (in Hodge, Greve and Boardman 2010) - National Audit Office (2009b) - Ernst & Young (2008) - Jones and Noble (2008) - AECOM (2007) - Partnerships Victoria (2006a) - Partnerships Victoria (2006b) - Trafford and Proctor (2006) - Cambridge Economic Policy Associates (2005) - Edwards, Bowen and Stewart (2005) - Klijn and Teisman (2003) - Partnerships Victoria (2003a) | • Personalities • Team working • Motivation / incentives | - None identified |
Management commitment & support | - Hope (2012) - Victorian Auditor-General (2007a) - New South Wales Treasury (2005a) - Harback et al (in Chan et al 2004)* - Arthur Andersen and Enterprise LSE (2000) - Cheng, Li and Love (2000)* - Pinto and Slevin (1987)* | • Negotiated outcomes • Acquisition and allocation of additional resources | - Spencer Street (Southern Cross) Station Re-development: Operator given an opportunity to resolve operational lapses rather than the public partner applying abatement for all instances of under-performance to encourage positive working relationships - New Schools Privately Financed Project: All responsibilities of PPP operators should be adequately defined under service delivery agreements | |
Employee capability & expertise | - Hope (2012) - Parliament of Victoria Public Accounts and Estimates Committee (2012) - HM Treasury (2011) - Forrer et al (2010) - National Audit Office (2009b) - Yuan et al (2009) - Ernst & Young (2008) - Organisation for Economic Co-operation and Development (2007) - Victorian Auditor-General (2007a) - Edwards et al (2004) - Office of the Director, Melbourne CityLink (2002) - Chua, Kog and Loh (1999)* | • Roles and responsibilities • Subject matter knowledge and applicability | - Spencer Street (Southern Cross) Station Re-development: A lack of resourcing can make it difficult for public partner contract managers to monitor the effectiveness of service provider performance - Spencer Street (Southern Cross) Station Re-development: Skill limitations may impact on the public partner's ability to effectively manage service contract oversight which may hinder the achievement of genuine VfM outcomes and compromise public safety - CityLink: Limitations relating to the structure and resources of public partner oversight can impact upon its ability to manage its contractual agreements, fulfil its ministerial reporting obligations, and may, in some instances, put public safety at risk - CityLink: A lack of public partner employee skills can impact upon the overall quality of its advice and lead to corporate memory loss | |
| Clear & open communication | - Hope (2012) - National Audit Office (2009a) - New South Wales Treasury (2005a) - Karlsen (2002)* - Arthur Andersen and Enterprise LSE (2000) - Cheng, Li and Love (2000)* | • Shared understanding • Trust building | - New Schools Privately Financed Project: If contractual responsibilities are not clearly articulated between key public partner employees and service providers, there may be potential for misunderstanding that could impact upon the effective use of resourcing |
| Relationship continuity | - Hoppe and Schmitz (2013) - Parliament of Victoria Public Accounts and Estimates Committee (2012) - Jones and Noble (2008) - Bowditch (2007) - Cambridge Economic Policy Associates (2005) - Arthur Andersen and Enterprise LSE (2000) | • Personal and professional influence | - None identified |
| Conflict management | - Sydney Morning Herald (2013a) - Sydney Morning Herald (2013b) - Walsh (2013) - Haynes (2012) - Hope (2012) - Saulwick (2012) - Brenninkmeijer (in Urio 2010) - Global Legal Group Ltd (2007) - Victorian Auditor-General (2007a) - Tomazin and Myer (2006) - Cambridge Economic Policy Associates (2005) - Das (2005) - Edwards et al (2004) - Hannan (2004) - Leung et al (2004)* - Victorian Auditor-General (2004) - Minister for Transport (2002) - Minister for Transport (2001) - Partnerships Victoria (2001a) | • Resourcing • Values and beliefs | - Spencer Street (Southern Cross) Station Re-development: Delays, cost overruns and contractual disputes can impact on the attainment of service delivery outcomes - New Royal Children's Hospital project: Managing disputes can be costly and time consuming. They may manifest in delays or unfulfilled project objectives - CityLink: Conflict can arise between the partners over information requests. Although the private partner is legally obligated to share operational data with its public partner on its request, it may not do so willingly - Cross City Tunnel: Disputes can arise due to misunderstanding between public and private partners (as well as from interpretation of contractual provisions) |
Risk | Implementation of transition plan | - Victorian Auditor-General (2007a) | • Project / integration challenges | - Spencer Street (Southern Cross) Station Re-development: Ineffective implementation of transition plans can impact on operational delivery as well as damaging relations between public and private partners - New Royal Children's Hospital project: Serious issues can arise during transition periods that were not envisaged during procurement and delivery phases |
Contract variation | - Transurban (2008) - New South Wales Treasury (2005a) - Edwards et al (2004) - Transurban City Link (2003) - Office of the Director, Melbourne CityLink (2002) - Partnerships Victoria (2001a) | • Modification of existing services • Re-allocation of risk • Business continuity planning modification | - New Royal Children's Hospital project: Force majeure events have the potential to critically impact upon the service provider's ability to perform its contractual obligations - CityLink: New legal requirements may lead to existing agreements being varied - New Schools Privately Financed Project: VfM achievement can be put at risk if the public partner does not take timely and decisive action to manage service provider under-performance | |
| Change of consortium members / change to public partner's agency authority | - Linking Melbourne Authority (2010) - New South Wales Treasury (2005) | • Exposure to new risks (researcher assertion) | - Spencer Street (Southern Cross) Station Re-development: Re-structuring of the public partner entity could expose government to new and un-intended risks (including how existing risks are managed / resourced) and corporate memory loss due to staff transitioning - EastLink: The transfer of statutory obligations to other statutory bodies has the potential to expose the public partner to un-intended risks including corporate memory loss due to staff changes during critical hand-over periods - New Schools Privately Financed Project: Soon after operations commenced, a number of complaints were received by the Department of Education over the quality of a contractor's services. This led to the termination of out of school hours care services (triggering an amendment to the contract) |
| Contract termination | - Edwards et al (2004) - Partnerships Victoria (2001a) | • Service provider failure | - Cross City Tunnel: A receiver may be appointed by government (or a court) if consortia is unable to meet its statutory obligations and / or pay its debts. In some cases, such situations may arise from the sustained financial impact of lower than expected service user demand |
| End of concession handover | - Edwards et al (2004) | • Knowledge transfer • Asset transfer | - New Royal Children's Hospital project: Service delivery performance may falter during transfer of assets from consortia ownership to public partner control if hand-over packages are not effective |
| Skills transfer | - Delmon (2011) - UK Parliament (2011) - Fitzgerald (2004) - Arthur Andersen and Enterprise LSE (2000) | • Capability improvement • Broadening public sector skills | - None identified |
| Reputation damage | - Lucas (2011) - Chung, Hensher and Rose (2010) - Lucas (2010a) - Hutton (2009) - Lucas (2009) - Minister for Roads and Ports (2009) - Joyner (2007) - New South Wales Parliament (2006a) - Hodge and Greve (2005) - Smith (2005) - Sydney Morning Herald (2005) - Lally (in Techapeeraparnich 2004) - Techapeeraparnich (2004) - Karlsen (2002)* | • Governance, probity and compliance • Confidentiality • Un-anticipated / un-intended events | - Spencer Street (Southern Cross) Station Re-development: Government may choose to intervene in operational matters. They may do so to avert negative media attention directed mistakenly towards the public sector for issues or mistakes that the private partner is legally accountable for resolving - EastLink: The government's reputation can be tarnished if intended benefits are not fully realised and / or the deliverables fail to meet service user expectations - CityLink: Government may decide it is necessary to intervene in situations where there is a public perception that service operators are treating their customers unfairly - New Schools Privately Financed Project: Sensitive financial and commercial information relating to PPPs such as cost structures, profit margins and intellectual property tend to be protected by 'commercial in confidence' arrangements. This can lead to criticism by public commentators - Cross City Tunnel: Unless government takes action to quash or re-direct public concern over issues that are the responsibility of operators, it may be blamed (unjustifiably) for service delivery shortcomings |
Performance | Contract monitoring systems modification | - Victorian Auditor-General (2007a) | • Performance management systems improvement • Performance management systems documentation (researcher assertion) | - Spencer Street (Southern Cross) Station Re-development: Contract monitoring regimes should be regularly reviewed to identify and manage performance / systems shortfalls |
| KPI modification | - Brenninkmeijer (in Urio 2010) - Mandri-Perrott (2010) - Lee and Fisher (2007)^ - Victorian Auditor-General (2007a) - Cambridge Economic Policy Associates (2005) - Edwards et al (2004) - Evans and Bellamy (1995)^ | • Annual KPI review (researcher assertion) • Ongoing KPI review | - Spencer Street (Southern Cross) Station Re-development: If KPIs are difficult to measure, they can adversely impact on the public partner's ability to successfully monitor and review service provider performance |
| Availability (and integrity) of performance data | - Forrer et al (2010) - National Audit Office (2007) - Victorian Auditor-General (2007a) - Victorian Auditor-General (2004) | • Availability of performance data • Integrity of performance data | - Spencer Street (Southern Cross) Station Re-development: Inaccurate data can potentially give rise to undetected or unreported incidents as well as intentional fraud, all of which could detract from the achievement of VfM outcomes - CityLink: Service providers use their own performance data as a basis for decision-making. Hence, there is potential that data will contain errors or omissions either through human error or from wrong-doing |
| Contract management | - Department of Treasury and Finance (2009) - National Audit Office (2009b) - Victorian Auditor-General (2009) - AECOM (2007) - Victorian Auditor-General (2007a) - New South Wales Auditor-General (2006) - Edwards et al (2004) - Partnerships Victoria (2003a) - Department of Public Works (2000)* | • Performance evaluation • Management reporting • Managing performance shortfalls • Opportunity (risk) implementation (researcher assertion) | - Spencer Street (Southern Cross) Station Re-development: Public partner performance management systems should be designed to capture outputs that do not meet stipulated standards as well as complaints lodged against operators - EastLink: VfM outcomes may not be achieved to their full potential unless service outputs are properly benchmarked - New Royal Children's Hospital project: In circumstances where service operators are responsible for monitoring their own performance, service outputs should still be validated by the public partner to confirm delivery standards are being met and compliance with policies, procedures and plans - New Royal Children's Hospital project: The public partner has a responsibility to complete and keep contract administration manuals up-to-date - New Schools Privately Financed Project: If the public partner does not provide sufficient oversight of the currency of service provider operations manuals, service delivery standards may be compromised - New Schools Privately Financed Project: If the public partner does not complete and maintain its contract administration manuals, performance monitoring and reporting strategies cannot be effectively implemented that achieve genuine VfM outcomes - Cross City Tunnel: The failure of the public partner to effectively manage its oversight responsibility may lead to situations were operators fail to meet service standards |
| Penalties & abatements | - Javed, Lam and Zou (2013) - Mandri-Perrott (2010) - National Audit Office (2009b) - Ernst & Young (2008) - Garvin and Bosso (2008) - Victorian Auditor-General's Office (2007a) - Department of Administration and Finance (2006) - New South Wales Auditor-General (2006) - Hodge and Greve (2005) - New South Wales Treasury (2005a) - Brumby and Batchelor (2002) | • Applying penalties and abatements • Incentive revisions | - Spencer Street (Southern Cross) Station Re-development: Penalties and abatement should be consistently applied unless there is a properly justified case for not doing so - New Schools Privately Financed Project: The public partner may not reap full VfM if it does not consistently apply abatement |
*Generic project issues (non-PPP specific) / ^Public sector performance systems / information issues (non-PPP specific) which are applicable to PPP