The operations to handback transition covers the period where the original PPP contract is coming to an end. This generally involves the asset or the operation of the asset being handed back to the Procuring Authority, or to a new Project Company or new operator. This transition is important as it will affect the ongoing provision of the public service, and the research indicates that it is sometimes not given the appropriate proactive, strategic consideration. The Project Company must comply with contractually stipulated handback requirements that should prescribe the asset condition to be demonstrated at the end of the contract term. The required asset condition may be described by technical standards, which should be measurable in order to be verified independently.
A key challenge at the handback stage is the commercial pressure for the Project Company to drive economic efficiencies in its maintenance activities in the period leading up to handback, which may lead to a deterioration in the asset condition. While there were limited examples of handback being implemented in the study, the research indicated that it is not unusual for the Project Company to 'sweat the asset' (i.e. try to extract as much value from the asset as possible while doing the least amount of maintenance, such that the asset handed back to the Procuring Authority is in need of extensive repair). If the Procuring Authority does not manage this phase adequately, it can find itself with an asset in an undesirable condition.
SUBSECTION STRUCTURE This subsection provides guidance on managing handback. The key elements of successfully managing the transition are summarised below and detailed in this subsection under the heading 'Guidance': A. Ensure the PPP contract contains protections around asset handback and that those protections are understood and utilised |