In Partnerships Victoria projects, there is an inherent incentive for the private party to adequately maintain the project assets so that it can continue to meet its KPIs and the services specifications. The private party will also appreciate that a backlog of maintenance can result in a need to undertake costly repairs later. However, the contract director cannot rely on these incentives alone to ensure an adequate level of asset maintenance.
A failure by the private party to allocate necessary expenditure to asset maintenance can be an indicator either of financial ill-health or a propensity to run down the asset, and perhaps have it fail the condition test on contract expiry (if applicable).
More recent project deeds generally require sufficient reporting (including on private party expenditures on asset condition and on service performance) by the private party to allow effective monitoring of asset maintenance, and may include KPIs related to the performance of planned maintenance activities. They may also include government party rights to audit asset quality, at its expense. In older project deeds, where such reporting and audit rights may not exist, it may be necessary for the government party to negotiate provision of this information from the private party to enable it to obtain sufficient comfort on this matter.