Using the change management principles discussed in this chapter, a Partnerships Victoria project is able to accommodate a range of change events that occur during the construction phase or the service delivery phase.
New service delivery innovations may provide potentially important change events that could provide both the private party and government party with benefits, including improved value for money outcomes for the project.
Under the outputs-based service model used by Partnerships Victoria, there is some flexibility for the private party to introduce service delivery innovations to more efficiently achieve the contractually agreed output requirements. As a result, the private party is able to realise the total benefit of these innovations.
However, if a new service delivery innovation presents a material change or requires a contract modification to meet the contractual output specification or services specification, the private party will be required to work with the government party to propose, evaluate and potentially implement a service delivery innovation. As a result, the benefits of such an innovation may be shared between both the private party and the government party.
As it is complex for the private party to work with the government party to implement innovative service delivery proposals, it is important that a contract director provides an environment that does not inhibit private sector innovation. A number of good contract management practices and principles outlined in this guide may be useful to assist to develop the right environment, including:
• developing a solid and transparent working relationship between the government party and the private party (which includes regular meetings) to promote a well-developed understanding of each parties needs and drivers;
• a cultural willingness to embrace innovation, where it is expected that a contract director will ask for new service delivery innovations, and the private party will actively look for and consider their service delivery innovations options;
• a contractual structure that supports (or at least does not inhibit) the private party from introducing new service delivery innovation proposals; and
• the contract director to consider providing incentives (such as cost reimbursements or a gain sharing mechanisms) to encourage the private party to invest in innovations.
The importance of encouraging innovation in Partnerships Victoria projects is demonstrated by including innovation clauses in a number of recent Partnerships Victoria projects and in the Partnerships Victoria standard project deed. These provisions are designed to encourage the private party to introduce new service delivery approaches that may potentially benefit both the private party and the government party. The private party may potentially improve its internal rate of return on the project, while the government party may potentially improve the value for money outcomes of a specific project (or across a wider portfolio of projects). This approach is being used on the Ravenhall Prison project to encourage best practice service delivery innovations. In this project, the private party is required to report to the State annually on potential innovations. Introducing innovations or changes is subject to developing a business case, which will allow the government party to analyse the project specific or wider service delivery benefits offered. This may result in the government party choosing to invest in a proposed innovation on the Ravenhall Prison project or across the wider portfolio of prisons operated by the Department of Justice and Regulation.