1. Management Contracts
A management contract is a contractual arrangement for the management of a part or whole of a public asset by the private partner. Management contracts allow private sector skills to be brought into service design and delivery, operational control, labour management and equipment procurement.
| Management contracts tend to be task specific; they are input rather than output focused. The ownership of the asset and the facilities are retained by the public entity. The simplest management contracts involve the private partner being paid based on its performance; its remuneration does not depend on the collection of tariffs and the private partner does not typically take on the risk of asset condition. Usually, the contract period is short, typically two to five years. But longer periods may be used for large and complex operational facilities such as a port or airport. |
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Use of management contracts is commonly found in the water and energy sectors. There is limited potential for improvements in efficiency and performance under the management contract, although more sophisticated management contracts (which are often called operation and maintenance contracts) may introduce some incentives for efficiency or improved bill collection by defining performance targets and basing a portion of the remuneration on its fulfilment (and cover longer time periods).
Other variants of management contract are:
• Supply/service contract
• Maintenance management
• Operational Management