Active contract management broadly refers to the circumstance where a Procuring Authority has taken on substantial obligations and risks, and needs to be closely and actively involved in contract management activities to manage those risks.
On large or complex projects, the Procuring Authority may still need to be closely and actively involved in the contract management, even where there has been substantial risk transfer to the Project Company.
There are several aspects of PPPs that are likely to require more active contract management:
Performance monitoring. PPPs are typically based on the principle that the Project Company will be self-monitoring, and will consequently submit a large volume of regular reports to the Procuring Authority for verification and approval. The Procuring Authority must therefore have personnel with the capability and experience to understand and analyse the Project Company's monitoring reports, and data interpretation may be resource intensive.
Stakeholder management. By their nature, PPP projects involve a vast array of inter-connecting relationships. These exist not only between the Procuring Authority and the Project Company, but also with and between other stakeholders including end users, the public, equity investors, lenders and other government departments. Adequate resourcing needs to be allocated to these relationships. On high-profile projects there is also the element of reputational risk that needs to be managed across these various relationships.
Land acquisition, enabling works and other obligations. The Procuring Authority may be responsible for enabling works, such as utility diversion, regulatory approvals or connection to interface infrastructure. The link between these activities and the Project Company's activities may present a significant risk. The Procuring Authority may also need to manage the performance of third parties whose projects and/or activities may have a material impact on the PPP contract. For many project types, it is common for the Procuring Authority to be responsible for land acquisition and right-of-way access.
PPP contracts also often require active involvement of the Procuring Authority during the construction period (e.g. sign-off on designs, construction programs, certification of completed milestones). The Procuring Authority needs to respond quickly to avoid being responsible for Project Company delays.
Scope changes and Project Company claims. Any kind of scope change, variation or Project Company claim can have significant financial implications for the Procuring Authority, and robust systems are required to effectively manage them.
Other aspects of PPP projects that require active management by the Procuring Authority team are disputes (the data indicates that 17% of PPPs encounter a dispute in the first four years after financial close), managing renegotiations (the data indicates that 45% of PPPs are renegotiated by their tenth year after financial close) and information management, which is relevant to many other activities.
The other chapters and sections of this reference tool detail the management of the aspects described above: Section 3.1 (Transitions), Section 3.2 (Performance monitoring), Section 3.3 (Stakeholder management), Section 3.4 (Information management), Section 3.5 (Claims), Chapter 5 (Disputes), etc.