The main approach the Procuring Authority can take to manage handback is to plan the process proactively. Depending on the size and complexity of the relevant asset, the Procuring Authority may need to start planning for handback three years or more before the expiration of the PPP contract.
It is recommended that consultation with relevant stakeholders take place at this early stage. This can assist the Procuring Authority to identify options for procurement strategies and/or potential operations contracts for the continuation of the services after handback has occurred.
A handback plan focuses on two key areas:
• Ensuring the asset meets the contractual requirement for handback
• Ensuring continuity of the service provided by the asset
On the first point, it is important that the Procuring Authority revisits the PPP contract and understands what the contractual obligations and entitlements are when the asset is handed back. The Procuring Authority must have a clear understanding of its goals for the end of the contract term, what the contract requires and what condition the asset is actually in leading up to handback. This will ensure the Procuring Authority does not receive the asset in a condition below the standards defined in the PPP contract.
Before commencement of the handback process, the Procuring Authority should also have a plan for how the testing and inspection of the asset condition will be performed, what audits will be carried out, and how the results will be used to measure compliance with the contract. During this process, the Procuring Authority should work with the Project Company to ensure both parties are aligned in terms of what condition the asset will be handed back in. If the asset is being transferred to a new Project Company or a new operator, that new Project Company should also be involved. This will benefit all parties, particularly where payments to the exiting Project Company are being withheld as contingency.
The Procuring Authority should also have a plan for how it will ensure service continuity. There should be a decision on whether the asset will be operated by the Procuring Authority, the current contract will be extended, a new operational contract will be tendered or a new PPP contract will be tendered. While the option of extending the existing contract may seem to be the most straightforward option, this is unlikely to provide the best value for money for the Procuring Authority, as the negotiation of the extension is typically carried out in the absence of competition.
In addition, as part of its transition to handback, the Procuring Authority should address issues such as the creation of an inventory of assets and goods, any indemnification required to a new Project Company or new operator (where the project is being retendered), and staff transfer, including budgeting issues related to new staff.