Twinning 2008 09 SetTwiting Up a Proper Risk Management System at the Project Level 2008 09

7/24/2019 Twinning 2008 09 SetTwiting Up a Proper Risk Management System at the Project Level 2008 09

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Public-PrivatePublic-Private

Partnerships in thePartnerships in theCzech RepublicCzech Republic

Setting up a proper riskSetting up a proper risk

management system at themanagement system at the

project levelproject levelTwinning Project CZ/2005/IB/FI/04Twinning Project CZ/2005/IB/FI/04

Training event on risk management in PPP projectsTraining event on risk management in PPP projects

Prague, inisterstvo !inanc", 2# a$ 200%Prague, inisterstvo !inanc", 2# a$ 200%

Rui Sousa MonteiroRui Sousa Monteiro(Parpblica SA, Portugal)(Parpblica SA, Portugal)


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ContentsContents

Risk management during procurement andRisk management during procurement and

after contract closeafter contract close

10 recommendations for setting up a proper10 recommendations for setting up a properrisk management system:risk management system:

On selecting and appointing the contractOn selecting and appointing the contract

managermanager

On budgeting, staffing, and planning forOn budgeting, staffing, and planning for

contract management activitiescontract management activities

On methodology and governanceOn methodology and governance


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e kno! that risk management ise kno! that risk management is

critical for """ efficiencycritical for """ efficiency


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Risk managersRisk managers

and PPP projects (1)and PPP projects (1)#oth theory and e$perience tell us:#oth theory and e$perience tell us:

that appropriate risk allocation is essencialthat appropriate risk allocation is essencialfor """ efficiency,for """ efficiency,

that risk allocation clauses are criticalthat risk allocation clauses are critical

during procurement, andduring procurement, and that risk must be properly managedthat risk must be properly managed

during the !hole life of the contractduring the !hole life of the contract


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Risk managersRisk managers

and PPP projects (2)and PPP projects (2) Risk allocation should be carefullyRisk allocation should be carefully

addressed from the outset of the contractaddressed from the outset of the contract

thetheproject leaderproject leadershould manage risksshould manage risks

during procurementduring procurement

%fter contract close, risk management is%fter contract close, risk management is

still criticalstill critical

thethe contract managercontract managershould addressshould address

risk managementrisk management


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&n general terms, risk management is&n general terms, risk management is

at the core of """at the core of """procurementprocurement


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#ut """#ut """ contract managementcontract managementtypically does not incorporatetypically does not incorporate

enough resources and capacityenough resources and capacity

for effective risk managementfor effective risk management


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11ststrecommendation:recommendation:

%void appointing the contract manager%void appointing the contract manager

'ust before (or after) contract close'ust before (or after) contract close


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From procurement toFrom procurement to

contract managementcontract management*ack of continuity bet!een procurement*ack of continuity bet!een procurement

management and contract managementmanagement and contract management

creates t!o problems:creates t!o problems: +uring procurement, the pro'ect manager+uring procurement, the pro'ect manager

is typically not sufficiently concerned !ithis typically not sufficiently concerned !ith

the operational phasethe operational phase

%fter contract close, the contract manager%fter contract close, the contract manager

is not !ell acuainted !ith the contractis not !ell acuainted !ith the contract


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When to appoint theWhen to appoint the

contract manager (1)contract manager (1)% good practice is to appoint the contract% good practice is to appoint the contract

manager prior to the end of themanager prior to the end of the

competitive phase of procurement, incompetitive phase of procurement, inorder to:order to:

a)a) Revie! the draft contract, addressingRevie! the draft contract, addressing

contract management details andcontract management details and

revie!ing risk allocationrevie!ing risk allocation

b)b) Set up the contract managementSet up the contract management

arrangementsarrangements


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When to appoint theWhen to appoint the

contract manager (2)contract manager (2)&n fact, public authorities tend to delay the&n fact, public authorities tend to delay the

appointment of contract managersappointment of contract managers

#ecause of financial and staff constraints#ecause of financial and staff constraints

#ecause they fear conflict bet!een the#ecause they fear conflict bet!een the

procurement manager and the contractprocurement manager and the contract

managermanager


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--ndndrecommendation:recommendation:

.onsider carefully the profile of.onsider carefully the profile of

the contract managerthe contract manager


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Contract managerContract manager

profileprofile SenioritySeniority

%deuate skills and e$perience%deuate skills and e$perience

/eam leadership/eam leadership

Openness to change and innovationOpenness to change and innovation

Strong ability to keep the focus onStrong ability to keep the focus on

the provision of service, not gettingthe provision of service, not getting

lost in details and daily routinelost in details and daily routine


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SenioritySeniority

/he contract manager must be/he contract manager must be

perceived (by all stakeholders) as aperceived (by all stakeholders) as aperson !ith a senior status, holdingperson !ith a senior status, holding

the appropriate ability to engage inthe appropriate ability to engage in

contacts and negotiations !ith allcontacts and negotiations !ith allthe relevant entitiesthe relevant entities


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Skills and eperienceSkills and eperience

"ro'ect management skills"ro'ect management skills

%nalytical skills%nalytical skills

egotiation skillsegotiation skills

.ommunication skills

.ommunication skills

inancial skillsinancial skills


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22rdrdrecommendation:recommendation:

#udget for contract management#udget for contract management

activitiesactivities


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!udgeting for!udgeting for

contract managementcontract management/he pro'ect manager should include in/he pro'ect manager should include in

the business case a realisticthe business case a realisticestimate of the needs and costs thatestimate of the needs and costs that

the public authority in charge of thethe public authority in charge of the

contract !ill incur for contractcontract !ill incur for contract

managementmanagement

(including staff, training, consultants)(including staff, training, consultants)


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33ththrecommendation:recommendation:

"lan the staffing for contract"lan the staffing for contract

management activitiesmanagement activities


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Staffing forStaffing for

contract managementcontract management

/he public authority in charge of the/he public authority in charge of the

contract should plan the hiring andcontract should plan the hiring andretaining of staff, looking for:retaining of staff, looking for:

skills and e$perienceskills and e$perience

capacity building andcapacity building and

kno!ledge transferkno!ledge transfer

continuity of staffcontinuity of staff


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Skills and eperienceSkills and eperience

%nalytical skills and good human relations%nalytical skills and good human relations

*egal (administrative la! , contract la!,*egal (administrative la! , contract la!,

public procurement, competition la!)public procurement, competition la!)4conomics (efficiency in procurement,4conomics (efficiency in procurement,

pro'ect finance, financial modelling, gamepro'ect finance, financial modelling, game

theory, incentive analysis)theory, incentive analysis)

Management (risk management,Management (risk management,

performance monitoring, auditing,performance monitoring, auditing,

benchmarking, market testing)benchmarking, market testing)


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Capacity "uildingCapacity "uilding

&nitial and ongoing training&nitial and ongoing training

5no!ledge sharing and transfer, bet!een5no!ledge sharing and transfer, bet!een""" contract management teams, and""" contract management teams, and

bet!een them and """ kno!ledgebet!een them and """ kno!ledge

centrescentres

&ntegrate international """ kno!ledge&ntegrate international """ kno!ledge

net!orksnet!orks


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Continuity of staffContinuity of staff

%void too high turnover of staff%void too high turnover of staff

acilitate reciprocal transfer of staffacilitate reciprocal transfer of staffbet!een similar """ contractbet!een similar """ contract

management teamsmanagement teams

.are for skill retention.are for skill retention

.are for information retention.are for information retention


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Refrain from e$cessive recourse toRefrain from e$cessive recourse to

e$ternal consultantse$ternal consultants


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#ternal consultants#ternal consultants

#alance carefully the creation of internal#alance carefully the creation of internal

capacity and the use of e$ternal adviserscapacity and the use of e$ternal advisersand consultants, developing and retainingand consultants, developing and retaining

skills in houseskills in house

%ct as an intelligent client, avoiding%ct as an intelligent client, avoiding

e$cessive use of consultantse$cessive use of consultants


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Pu"lic sector ad$isersPu"lic sector ad$isers

7se specialist advice from the public7se specialist advice from the public

authority8s internal departments orauthority8s internal departments or

advisersadvisers

4stablish protocols !ith national (or4stablish protocols !ith national (or

4uropean) """ kno!ledge centres, in4uropean) """ kno!ledge centres, in

order to share scarce capacityorder to share scarce capacity

+evelop contacts and kno!ledge sharing+evelop contacts and kno!ledge sharing

protocols !ith similar contractprotocols !ith similar contract

management teams in other countriesmanagement teams in other countries


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&dentify the initial and ongoing&dentify the initial and ongoing

training reuirementstraining reuirements


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Standard trainingStandard training

.ontract management.ontract management

Risk managementRisk management "erformance monitoring"erformance monitoring

4fficiency auditing4fficiency auditing (valueformoney)(valueformoney)

#enchmarking and market testing#enchmarking and market testing

.ommunication.ommunication

.onflict management and negotiation.onflict management and negotiation


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Specific trainingSpecific training

/ypically internal training sessions:/ypically internal training sessions:

/esting procedures/esting procedures "reparing for persistent default"reparing for persistent default

"reparing for changes and variations"reparing for changes and variations

.onsider the possibility of holding inter.onsider the possibility of holding inter

national training eventsnational training events


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PPP kno%ledge transferPPP kno%ledge transfer

&ntraministerial """ kno!ledge transfer&ntraministerial """ kno!ledge transfer(several contract mgt teams)(several contract mgt teams)

&nterministerial """ kno!ledge transfer&nterministerial """ kno!ledge transfer(e;g; through the """ .entrum)(e;g; through the """ .entrum)

&nternational """ kno!ledge transfer&nternational """ kno!ledge transfer


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&he contract management&he contract managementmanualmanual(1)(1)

#asic methodological items:#asic methodological items:

Risk register and risk managementRisk register and risk management

"erformance monitoring"erformance monitoring

.ommunication strategy and plan.ommunication strategy and plan

"artnership protocols and behaviour"artnership protocols and behaviour

Managing conflictManaging conflict

Managing change and variationsManaging change and variations

.ontingency plans.ontingency plans


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&he contract management&he contract managementmanualmanual(2)(2)

Other items addressed in the Manual:Other items addressed in the Manual:

&nformation interchange protocols&nformation interchange protocols

&nstitutional contacts directory&nstitutional contacts directory

&nstitutional reporting&nstitutional reporting

Rules for interface !ith stakeholdersRules for interface !ith stakeholders &nvoice validation and payments&nvoice validation and payments

.ontract management portfolio.ontract management portfolio


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==ththrecommendation:recommendation:

+efine the governance structure+efine the governance structure


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'o$ernance structure'o$ernance structure

+efine the structure of the contract+efine the structure of the contractmanagement teammanagement team

.larify roles (accountability, decision.larify roles (accountability, decisionmaking rules, clear responsibilities !ithmaking rules, clear responsibilities !ithno overlap)no overlap)

+efine reporting reuirements+efine reporting reuirements

4stablish interfaces !ith the other4stablish interfaces !ith the otherstakeholdersstakeholders


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>>ththrecommendation:recommendation:

Manage variations to the contractManage variations to the contract


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anaging $ariationsanaging $ariations

Scrutinise reuests for change:Scrutinise reuests for change:

construction changesconstruction changes

revie!ed output specifications andrevie!ed output specifications andperformance indicatorsperformance indicators

changes in la! that have an impact onchanges in la! that have an impact on

service provisionservice provision

4valuate cost implications, challenge the4valuate cost implications, challenge the

information provided by the privateinformation provided by the private

partner, and achieve best valuepartner, and achieve best value


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Contingency plans (1)Contingency plans (1)

"repare to deal !ith persistent default"repare to deal !ith persistent default

by the private partner:by the private partner:

"enalties and increased monitoring"enalties and increased monitoring Stepin and management of the serviceStepin and management of the service

by the public authorityby the public authority

Stepin by the financing partiesStepin by the financing parties 4ventual termination of the contract4ventual termination of the contract


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Contingency plans (2)Contingency plans (2)

.ontingency plans should not be overly.ontingency plans should not be overlycomplicated, and should consider:complicated, and should consider:

Remedies for potential problemsRemedies for potential problems ?o! to mobilise staff and resources at?o! to mobilise staff and resources at

short noticeshort notice

.onsents !hich may be needed and from.onsents !hich may be needed and from!hom!hom

Steps needed to return the pro'ect toSteps needed to return the pro'ect tonormal monitoring after any eventnormal monitoring after any event


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Summary (1)Summary (1)

%ppoint the contract manager at an early%ppoint the contract manager at an early

stagestage

.onsider carefully the profile of the.onsider carefully the profile of thecontract managercontract manager

#udget for contract management activities#udget for contract management activities

"lan the staffing for contract management"lan the staffing for contract managementactivitiesactivities


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Summary (2)Summary (2)

Refrain from e$cessive recourse toRefrain from e$cessive recourse toe$ternal consultantse$ternal consultants

&dentify the initial and ongoing training&dentify the initial and ongoing trainingreuirementsreuirements

Set up a contract manag8t manualSet up a contract manag8t manual

+efine the governance structure+efine the governance structure

Manage variations to the contractManage variations to the contract

"repare contingency plans"repare contingency plans


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/hank you

Rui Sousa onteiroRui Sousa onteiro

Parp"lica SParp"lica S**Rua *aura %lves, 3,Rua *aura %lves, 3, ==@, 106012= *isboa@, 106012= *isboa, "ortugal, "ortugal

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Twinning 2008 09 SetTwiting Up a Proper Risk Management System at the Project Level 2008 09

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