3. Contract Management Framework
Contract management encompasses various aspects of an organization or a PPP project. The large number of PPP contract failures and renegotiations in the last decade highlight the importance of a thorough understanding of the post award contract management function. Well-structured contracts and effective on ground preparation are key to good contract management. Contract management involves developing and implementing processes and procedures to enable the public entity and the private partner to meet their obligations in achieving the desired outcomes as per the contract terms. Contract management activities go beyond mere administration of contracts.
From the time of issue of the Letter of Award until the expiry of the Concession Agreement, there are a number of specific activities pertaining to the post award contract management which are to be performed by the public entity. The need for contract management is driven by:
1. the social impact for not being able to deliver the service as per the PPP arrangement;
2. the financial impact of cost and time over-runs
3. the damage to reputations due to project disruption on account of disputes between the parties
Contract management requires defining the processes enabling both public entity and the private partner meet their respective obligations, building good working relationships, monitoring project performance in meeting the stated objectives and mitigating risks
Contract Management takes into account, performance monitoring of the private partner, relationship management with all stakeholders, resolution to disputes if any, and in a nutshell tries to serve all the objectives set out in the Concession Agreement in the best possible manner.
The diagram below provides an overview of key components of Contract Management in context of PPP projects:
Keeping in view the distinct set of issues and risks that the projects developed under PPP framework encounter during the project development life cycle; it can be stated that a Contract Management framework would need to serve the following set of objectives:
| No. | Objective | Key Aspects |
| 1 | Planning and Project Management | • Identification of constraints and addressing the same • Advance planning/ risk management through early alarm bells |
| 2 | Regular Management/ Monitoring | • Management of public entity's rights, obligations and contingent liabilities • Ensuring performance of obligations by private partner • Management of incentives and penalties • Monitoring of critical tasks/ timelines • Tariff/ payment adjustments • Handover management • Dispute resolution |
| 3 | Compliance | • Ensuring adherence to laws, policy and regulation • Ensuring adherence to required Governance principles |
| 4 | Public entity's Accountability | • Continuity of adherence of objective of the project • Ensuring intended use of public resources |
| 5 | Managing Eventualities | • Management of eventualities/ contingencies like force majeure, termination, etc. • Renegotiation management • Change management |
| 6 | Effective Coordination | • Relationship management with private partners • Internal coordination amongst Departments • Coordination with third parties |
| 7 | Institutional Perspective | • Ensuring uniformity in contract management approach • Streamlining communication\Maintaining institutional memory • Capturing and monitoring performance indicators |
| 8 | User Perspective | • Protection of user rights • User grievance/ feedback management • Knowledge management and information sharing with stakeholders |
Source: Post Award Contract Management Guidelines for PPP Concessions, PPP Cell, Infrastructure Division, DEA, Government of India