'Finance and budget management' is a new sub-issue identified by FG02. Table 9.7 shows participant feedback and the researcher's response to the comments.
Table 9.7 Finance and Budget Management.
Participant | Feedback | Researcher Response |
FG02 | The financial aspects may be somewhat lightly expressed in the model. I am thinking about activities like: - Managing the contract management budget including its update over time and considering corrective actions - Managing the impact of owner's and supplier's modifications on the budget, asset management plan, quarterly service fees and financial model - Ensuring that warranty or fit-for-purpose issues are appropriately managed - Managing the financial implications of disputes and potential settlements - Refinancing with consortia partners during the life of the PPP or when the circumstances of the financial market are favourable | Accepted. The IMM is not designed as a financial model, however, this feedback impacts upon performance management practices and therefore, the achievement of VfM outcomes |
With regard to refinancing, FG02 informs that contracts can contain benefit-sharing mechanisms that may benefit both public and private partners e.g. renegotiating the consortia's original capital structure or debt for more favourable terms. FG02 implies refinancing by the private partner ought to be "handled carefully" as although there is potential for mutual gain, there is equally potential for mutual loss. The impact of significant downside risk being realised for the public partner is, for example, that additional (replacement) funding has to be secured from government to cover its operating costs, and perhaps be obtained at the expense of other public services or programs that are being delivered outside of the PPP.
Shared insurance policies should also be reviewed regularly to reduce the risk of paying higher than necessary insurance premiums over the remainder of the operating term. Therefore, the 'review insurance policies' treatment identified in Chapter 8 (see 'Table 8.19 Treatments for Performance Monitoring and Adjustment') has been absorbed into the treatments for 'Finance and budget management', above.
More broadly, FG02's feedback is accepted in terms of the treatment actions for this new sub-issue, and therefore establishes relationships between 'Finance and budget management' and:
- 'Management commitment and support';
- 'Conflict management';
- 'Modification of existing services';
- 'Performance monitoring and adjustment'; and
- 'Penalties and abatements'.