James Aiello

PricewaterhouseCoopers

 

Africa Utility Week 06International Good Practice in Procurement

Contents – Session 2

PPP procurement practices in South Africa Contract Management

Overview Approach by Contracting Party Contract Management Functions Consequences for failure to deliver services Administration, variation, maintenance and

financial matters Summary

Applicability to private sector tendering practices

Contract Management Overview

Contract Management is: Process enabling both parties to meet

obligations Involves building good working

relationship Enables & assists in anticipating

future needs Implemented through the Contract

Management Plan

Contract management plan

In parallel with the negotiations process, the institution must prepare a contract management plan, in consultation with the preferred bidder

Contract management plan contents: Partnership management Service delivery management

Risk management Service delivery management

Outsourcing agreement administration Variation management Outsourcing agreement maintenance Financial administration

Contract Management Functions

Varies from project to project, BUT Has three main functions:

Partnership Management Service Delivery Management Contract Administration

Contract Management Framework

Addresses four main PPP stages: Procurement Development Delivery Exit

Contract Management – Approach by Institution

Institution does not row – it steers Must respect transfer of

responsibilities to service provider Focus is on Outcomes

Quality assurance Performance monitoring Corrective actions, where required

Institution’s Roles & Responsibilities

Primary Institution personnel – Institution’s Project Representative

and its Project Officer

Institution’s Project Representative’s Role

Appointed as soon as outsourcing identified

Signs the outsourcing agreement Is a person of significance Provides continuity throughout

entire outsourcing process

Role of Project Officer

Accountable to Project Representative Has delegated authority to:

Manage project on behalf of institution Ensures continued affordability, value for

money & transfer of risk during the outsourcing

Ensures both parties meet all contractual obligations

Ensures Output Specifications all met Appoints Contract Management Team

Contract Management Team

Provides support to Project Officer in managing Contract

Composition of Team varies, but may include: Technical

Financial

Legal

Human Resources disciplines

Partnership Management Function

Key dimensions:

Corporate Governance

Communication and information sharing

Dispute Resolution

Partnership Management -- CorporateGovernance

Corporate Governance – structures, systems, policies and mechanisms of accountability within an organisation

South Africa has King Code of Corporate Practices & Conduct

Broadens financial focus to include environmental and social aspects

Applies fairness, accountability, responsibility and transparency to all activities

Requires accountability to the organisation and stakeholders

Partnership Management -- Communications

Communications can make or break a partnership

Failure to communicate causes more problems than failure to perform

Information sharing based upon trust and balancing negotiating positions

Communications take place between different levels in both organisations

Partnership Management – Dispute Resolution

Dispute Resolution processes in outsourcing contract

All disputes must follow same route from project liaison personnel on both sides to the institution’s project representative and service provider’s CEO

Important to: Record problems as they occur Notify of problems by correct route at correct level Document approaches to resolving problems Escalate only as per contract

Service Delivery Management

Two Principal Areas

Risk Management – managing project threats

Performance Management – ensuring the project continues to be affordable, provide value for money, and that significant risks stay with the service provider

Risk Management

Central component of contract management Contract risk allocation reflected in Contract

Management Plan Project Officer allocates “ownership” of each

risk to member(s) of the Project Management Team

Risk measures determined and implemented Assessment of mitigation measures is ongoing

Performance Management

Ensures contract anticipated affordability, value for money and risk transfer

Level of performance to achieve Outputs

Reflects contract provisions

Consequences for Failure to Meet Service Levels

Monitoring should provide basis for measuring performance against outputs

Failure to meet outputs dealt with per contract

Formal warnings

Penalty deductions

Step-in rights

Should be implemented to achieve positive response

Contract Administration

Administrative process to manage all documents and processes

Contract Administration Plan

Systems & procedures for contract maintenance, variation management and financial administration

Roles & responsibilities of institution & service provider

Institution’s resources needed to implement

Variation Management

Few contracts stay the same: changes will occur

Establish a system for handling changes

“No cost” changes – do as and when necessary

Small works variations – approvals required, depending on level of variation

Institution-initiated variations – formal notice & mutual agreement process

Service provider-instituted variations – formal amendment of outsourcing contract

Contract Maintenance

Processes and procedures to ensure

Contract & related documents up to date & consistent

Accessible to all relevant parties

Provides basis for common view of contractual obligations

Financial Administration

Systems and procedures to:

Make and receive financial payments

Keep records of all financial statements, per contract

Making Unitary and Incentive payments

Administering penalty deductions

Calculating inflation

Dealing with late payments

Receiving financial reports

Summary

Contract Management Plan a critical document

Contract Management Framework for implementation

Partnership approach by institution essential – “rowing”

Institution’s Project Representative & Project Officer

Contract Management Team & “ownership” of issues/risks

Partnership Management

Performance Management

Contract Administration

Applicability to private sector tendering practices

The PPP procurement processes can be of assistance in major, complex private sector outsourcing projects, but without an institutionalized contract management process and plan, the outsourcing is at risk.

The contract management plan discipline helps ensure successful implementation of the outsourcing by focusing on:

Managing the outsourcing partnership Enabling both parties to meet their obligations Ensuring that risks transferred stay transferred Providing a mechanism for dealing with future needs Managing the project knowledge enabling ongoing performance audits Implementing identified mitigation processes when risks occur Providing an exit mechanism when the outsourcing contract ends

                                                               

Thank You

James Aiello

 

Africa Utility Week 06International Good Practice in Procurement