5.2.2  Performance Monitoring

In order to implement a robust Performance Monitoring strategy, the following steps should be taken:

1.  Develop a performance management model as part of the Partnership Contract and integrate it into the Contract Management plan: The Preferred Bidder's performance requires constant measurement against agreed performance indicators, so that any decline or improvement in the provision of services can be noticed early and be penalised or rewarded accordingly. Any alterations to the agreed standards set for quality, delivery, performance, or monitoring methods should be formalised under the Project Contract.

2.  Bring together performance improvement methods: The project's performance indicators require regular review so that any decline or improvement in service delivery can be monitored and corrective action can be taken if necessary. This should also ensure adherence to the Risk Allocation strategy.

3.  Execute effective Performance Monitoring: While chiefly expected to be conducted by the Partnership Contract Manager and the Contract Management team as chosen by the Government Entity, in sectors where there is a chief regulator, some of the monitoring can be performed by that entity.

Sources of monitoring include:

  Data provided by the Private Party: Usually, the private sector party is responsible for sending regular performance update reports to the Government Entity, the content, frequency and format of which should be specified in the contract;

  Independent experts: Spot checks and audits can be carried out by independent agencies in order to avoid bias or provide a second opinion, as with the utilisation of independent engineers in order to monitor compliance during the construction phase; and,

  Service users: During the operation phase, if the private sector partner has a direct interface with users, the government can set up an interface for direct feedback from the community on the Project Company's performance.

4.  Assess performance and take curative action: In line with the agreed contractual terms, the Government Entity must then evaluate the performance against the stated monitoring standards, and take the relevant action. As outlined in the Partnership Contract, there must be a gradation of penalties for poor performance, with the requisite fine progressively getting worse in line with the severity of the transgression. As agreed between the parties, warnings, formal notifications, fee deductions, step-in clauses, and other relevant responses must be considered by the Government Entity, along with the curative measures that are required to be taken accordingly. In considering such practice, the Government Entity must perform a balancing act - if the practice is seen as too rigid, Private Players will be deterred from bidding and existing provision of services will be impacted, whilst if the regime is too lenient, a situation of moral hazard might be encouraged.