Public Private Partnerships should be based on establishing the 'right' working culture (Edwards, Bowen and Stewart 2005; National Audit Office 2009, p.55) that is beneficial to both partners, and then maintaining good relations (Partnerships Victoria 2003, p.16; AECOM 2007, p.75; Ernst & Young 2008, p.13) over the life of the contract to deliver agreed outcomes (Weihe in Hodge, Greve and Boardman 2010, p.520). Un-cooperative working environments (Klijn and Teisman 2003) often lead to operational difficulties between partners, and poor relationships and unsatisfactory performance go 'hand in hand' (National Audit Office 2009, p.55). Therefore, to achieve VfM outcomes, the interview findings show that the public partner should effectively manage the tension between partnership management and performance management. In addition to applying mechanisms for reducing negative behaviour e.g. abatement, public partner decisionmakers should encourage positive behaviour in their private partner through incentives that drive the 'right performance' culture. This could be where the private partner goes 'above and beyond the call of duty'. Such behaviour may foster a stronger 'working together' culture between partners.
Commitment and support from senior public partner management may be needed to address under-performance (Harback et al in Chan et al 2004; Hope 2012) or other difficulties (Pinto and Slevin 1987) that arise between public and private partners in PPP. For the public partner, a contract manager may be supported through the provision of additional resources such as more staff or the allocation of more time to review and then report upon complex service delivery outcomes (Arthur Andersen and Enterprise LSE 2000, p.38; Cheng, Li and Love 2000). Interview participants suggest that PPP working committees should generally be more supportive of the contract management function and recognise that in order to obtain better VfM outcomes, contract management teams should be provided with necessary resources.
A lack of resourcing can make it difficult for public partner contract managers to monitor the effectiveness of private partner performance, particularly over an extended period of time. Skill limitations (Organisation for Economic Co-operation and Development 2007, p.20; Yuan et al 2009; Hope 2012) may also impact on the public partner's ability to effectively manage contracts which may hinder the achievement of VfM outcomes (Edwards et al 2004, p.63; Organisation for Economic Co-operation and Development 2007, p.20) and compromise public safety and satisfaction. The interview findings confirm this view. A potential risk for the public partner, in relying too heavily on external contractors and consultants, is that they may not adequately transfer appropriate technical knowledge to public employees, nor do so in a timely way, which may result in the public partner paying high market rates for longer than necessary or be left unexpectedly to deal with skills-gaps if the external providers should leave suddenly. Although weighted towards a compliance-orientated approach to contract management, there is merit in using a calendar of deliverables tool to support junior public partner contract managers in managing tasks as specified under a concession deed. Such a system can be configured to meet the requirements of individual PPP contracts in a way that 'takes users step-by-step through what they need to do, how it should be done and when to do it'.
Conflict between public and private partners may be inevitable (Edwards et al 2004, p.55). However, conflict should be managed to reduce animosity and build understanding and trust. Broadly speaking, disagreements arise over timeframes, costs and quality issues (Leung et al 2004) as well as project priorities (Hope 2012); manpower resources; and individual or organisational biases or preferences. Interview participants point to significant financial impacts/unforeseen cost burdens that can shape public partner VfM outcomes, where one partner fails to meet the expectations of the other e.g. where the intent of a service specification has been misunderstood or where a KPI has not been adequately defined. PPP partners should operate a 'no blame' culture. Such a mindset can be a more efficient and effective way to overcome obstacles compared with apportioning blame to a particular person or party. Issues that are not easily resolved should be escalated and managed (as appropriate) with relevant contractual clauses and dispute resolution mechanisms. Having occasional or periodic discussions with private partner representatives can be valuable for keeping an open dialogue to understand what the long-term intentions are that can impact on the contract.
If KPIs are difficult to measure, they can adversely impact on the public partner's ability to successfully monitor and review private partner performance (Evans and Bellamy 1995). Ideally, but depending upon the nature of the contract, performance ranges for
KPIs should be reviewed regularly in conjunction with the private partner. It is therefore important to have flexibility between the partners with respect to KPIs to ensure the services being delivered actually match those intended as part of the business case; and to take necessary steps to address consequential misalignment between expectation and practice. From a public partner perspective, the need for change may arise, for example, over governance structure inadequacies, trend analysis findings e.g. patterns identified in failure event reports/output exception reports, service user complaints, audit findings, variations to contractual agreements arising from wider industry drivers e.g. economic recession. Changes should be relevant, measurable, repeatable and achievable.
With regard to threat posed by force majeure events or risk re-allocation, e.g. 'takeback' of services that may lead to variation of a concession deed, business continuity plans should be developed to address the issues faced (Partnerships Victoria 2001a, p.161) before the risk becomes an event, and to ensure uninterrupted service delivery if the event is realised. The public partner should at least obtain from its private partner the basis on which the latter's opinions are formed, the services that are/likely to be affected, how long they are expected to be affected, measures that the consortia will employ to avoid or minimise disruption (including associated costs), insurance policy details as well as regular updates on the situation. This information could be used as a foundation for activating public partner business continuity plans (as well as documentation received from other relevant sources). If separate from its business continuity planning efforts, government should initiate its communication plans to inform key stakeholders (including the public) of ongoing developments e.g. service availability and risks to public safety.
For most social infrastructure PPPs, financial incentives are offered to private partner operators in the form of regular structured payments from the public partner. Deductions may be applied (typically due to an accumulation of penalty points which is then used to calculate an abatement) for failing to meet KPIs for instances of underperformance or non-compliance. Such abatements should be consistently applied unless there is a properly justified case for not doing so, e.g. to foster positive working relationships (Ernst & Young 2008, p.13; National Audit Office 2009, p.56). Interview participants reason that the decision to apply abatement for under-performance is primarily a matter of professional judgement. Knowing when to apply abatement and when to allow flexibility can be strategically important with respect to building and maintaining effective partnership relations. The rationale for each instance of non-abatement should be fully documented to protect against public audit or departmental/external agency criticism. Although the concession deed is the reference point and is considered as the 'line in the sand' between the parties when agreement cannot be reached, it should be routine to document decisions that vary the administration or implementation of the contract. The benefit of effective documentation extends to clearer lines of accountability (crucial for the public partner), fewer misunderstandings between partners, and reducing the potential for conflict.