The government party's ability to monitor the performance of the private party largely depends on the private party being required to report appropriately under the project deed. Consequently, it is essential that reporting requirements are considered early in the procurement phase, are written into the request for proposal and the draft project deed provided to bidders, and are retained in the executed project deed. |
In developing an appropriate performance monitoring and reporting strategy, the government party needs to consider the following issues in the context of the particular project:
• the timescale for monitoring and reporting - the government party must consider how its monitoring and reporting activities should change over time. In a Partnerships Victoria project, the level and type of monitoring and reporting that was appropriate during the construction phase is likely to be quite different from that required during the subsequent service delivery phase, where the reporting requirements may even differ between initial service delivery and mature steady-state service delivery;
• the nature of the monitoring and reporting - the type of project and any external regulatory controls influence monitoring and reporting requirements. A reliance (partially or fully) on self-reporting by the private party, combined with random review or auditing by the government party may be appropriate in some PPPs (e.g. waste water treatment facilities) whilst in others (e.g. hospital) self-reporting by the private party may be combined with more regular hands-on monitoring and reporting by the government party. Monitoring may be undertaken fully by the contract management team or delegated in part to the government party customers (e.g. Melbourne Convention and Exhibition Trust);
• the range of reporting information - the information to be reported and monitored will vary for different projects and sectors. Requirements for a hospital project are different from the requirements for a waste water treatment project. Monitoring requirements also depend on the project delivery structure and project documentation. For example, appropriate financial reporting for a special purpose vehicle may be different from financial reporting where the private party is a substantial publicly listed company undertaking the project based on the strength of its own balance sheet; and
• level or type of action envisaged based on monitoring and reporting - the government party's monitoring and reporting should enable it to effectively focus control on key areas. The authorisation of regular service payments is one such key area. Therefore, the monitoring system needs to supply relevant information in relation to the payment mechanism (including the service standards that underpin the payment mechanism).
Contract management team members who perform these tasks should understand the private party's business and have experience in performance monitoring of service delivery projects. The government party should set expectations for reporting from day one, consistent with the level and form of reporting that needs to be provided in line with contractual requirements. This reinforces the importance of appropriate reporting.