Public-Private Public-Private Partnerships in the Partnerships in the Czech RepublicCzech Republic
Setting up a proper risk Setting up a proper risk management system at the management system at the project levelproject level
Twinning Project CZ/2005/IB/FI/04Twinning Project CZ/2005/IB/FI/04Training event on risk management in PPP projectsTraining event on risk management in PPP projectsPrague, Ministerstvo financí, 26 May 2008Prague, Ministerstvo financí, 26 May 2008
Rui Sousa MonteiroRui Sousa Monteiro(Parpública SA, Portugal)(Parpública SA, Portugal)
22
ContentsContents
Risk management during procurement and Risk management during procurement and after contract closeafter contract close
10 recommendations for setting up a proper 10 recommendations for setting up a proper risk management system:risk management system:• On selecting and appointing the contract On selecting and appointing the contract
managermanager
• On budgeting, staffing, and planning for On budgeting, staffing, and planning for contract management activitiescontract management activities
• On methodology and governanceOn methodology and governance
33
We know that risk management is We know that risk management is critical for PPP efficiencycritical for PPP efficiency
44
Risk managersRisk managersand PPP projects (1)and PPP projects (1)
Both theory and experience tell us:Both theory and experience tell us:
• that appropriate risk allocation is that appropriate risk allocation is essencial for PPP efficiency,essencial for PPP efficiency,
• that risk allocation clauses are critical that risk allocation clauses are critical during procurement, andduring procurement, and
• that risk must be properly managed that risk must be properly managed during the whole life of the contractduring the whole life of the contract
55
Risk managersRisk managersand PPP projects (2)and PPP projects (2)
• Risk allocation should be carefully Risk allocation should be carefully addressed from the outset of the contract addressed from the outset of the contract
the the project leaderproject leader should manage risks should manage risks during procurementduring procurement
• After contract close, risk management is After contract close, risk management is still criticalstill critical
the the contract managercontract manager should address should address risk managementrisk management
66
In general terms, risk management is In general terms, risk management is at the core of PPPat the core of PPP procurement procurement
77
But PPP But PPP contract management contract management typically does not incorporate typically does not incorporate enough resources and capacity enough resources and capacity for effective risk managementfor effective risk management
88
11stst recommendation: recommendation:
Avoid appointing the contract manager Avoid appointing the contract manager just before (or after) contract closejust before (or after) contract close
99
From procurement to From procurement to contract managementcontract management
Lack of continuity between procurement Lack of continuity between procurement management and contract management management and contract management creates two problems:creates two problems:
• During procurement, the project manager During procurement, the project manager is typically not sufficiently concerned with is typically not sufficiently concerned with the operational phasethe operational phase
• After contract close, the contract manager After contract close, the contract manager is not well acquainted with the contractis not well acquainted with the contract
1010
When to appoint theWhen to appoint thecontract manager (1)contract manager (1)
A good practice is to appoint the contract A good practice is to appoint the contract manager prior to the end of the manager prior to the end of the competitive phase of procurement, in competitive phase of procurement, in order to:order to:
a)a) Review the draft contract, addressing Review the draft contract, addressing contract management details and contract management details and reviewing risk allocationreviewing risk allocation
b)b) Set up the contract management Set up the contract management arrangementsarrangements
1111
When to appoint theWhen to appoint thecontract manager (2)contract manager (2)
In fact, public authorities tend to delay the In fact, public authorities tend to delay the appointment of contract managersappointment of contract managers
• Because of financial and staff Because of financial and staff constraintsconstraints
• Because they fear conflict between the Because they fear conflict between the procurement manager and the contract procurement manager and the contract managermanager
1212
22ndnd recommendation: recommendation:
Consider carefully the profile of Consider carefully the profile of the contract managerthe contract manager
1313
Contract manager Contract manager profileprofile
• SenioritySeniority• Adequate skills and experienceAdequate skills and experience• Team leadershipTeam leadership• Openness to change and innovationOpenness to change and innovation• Strong ability to keep the focus on Strong ability to keep the focus on
the provision of service, not getting the provision of service, not getting lost in details and daily routinelost in details and daily routine
1414
SenioritySeniority
The contract manager must be The contract manager must be perceived (by all stakeholders) as a perceived (by all stakeholders) as a person with a senior status, holding person with a senior status, holding the appropriate ability to engage in the appropriate ability to engage in contacts and negotiations with all contacts and negotiations with all the relevant entitiesthe relevant entities
1515
Skills and experienceSkills and experience
• Project management skillsProject management skills• Analytical skillsAnalytical skills• Negotiation skillsNegotiation skills• Communication skillsCommunication skills• Financial skillsFinancial skills
1616
33rdrd recommendation: recommendation:
Budget for contract management Budget for contract management activitiesactivities
1717
Budgeting forBudgeting forcontract managementcontract management
The project manager should include in The project manager should include in the business case a realistic the business case a realistic estimate of the needs and costs that estimate of the needs and costs that the public authority in charge of the the public authority in charge of the contract will incur for contract contract will incur for contract managementmanagement(including staff, training, consultants)(including staff, training, consultants)
1818
44thth recommendation: recommendation:
Plan the staffing for contract Plan the staffing for contract management activitiesmanagement activities
1919
Staffing forStaffing forcontract managementcontract management
The public authority in charge of the The public authority in charge of the contract should plan the hiring and contract should plan the hiring and retaining of staff, looking for:retaining of staff, looking for:
• skills and experienceskills and experience• capacity building and capacity building and
knowledge transferknowledge transfer• continuity of staffcontinuity of staff
2020
Skills and experienceSkills and experience
Analytical skills and good human relationsAnalytical skills and good human relations
Legal (administrative law , contract law, Legal (administrative law , contract law, public procurement, competition law)public procurement, competition law)
Economics (efficiency in procurement, Economics (efficiency in procurement, project finance, financial modelling, game project 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)
2121
Capacity buildingCapacity building
• Initial and ongoing trainingInitial and ongoing training• Knowledge sharing and transfer, between Knowledge sharing and transfer, between
PPP contract management teams, and PPP contract management teams, and between them and PPP knowledge between them and PPP knowledge centrescentres
• Integrate international PPP knowledge Integrate international PPP knowledge networksnetworks
2222
Continuity of staffContinuity of staff
• Avoid too high turnover of staffAvoid too high turnover of staff• Facilitate reciprocal transfer of staff Facilitate reciprocal transfer of staff
between similar PPP contract between similar PPP contract management teamsmanagement teams
• Care for skill retentionCare for skill retention• Care for information retentionCare for information retention
2323
55thth recommendation: recommendation:
Refrain from excessive recourse to Refrain from excessive recourse to external consultantsexternal consultants
2424
External consultantsExternal consultants
• Balance carefully the creation of internal Balance carefully the creation of internal capacity and the use of external advisers capacity and the use of external advisers and consultants, developing and retaining and consultants, developing and retaining skills in houseskills in house
• Act as an intelligent client, avoiding Act as an intelligent client, avoiding excessive use of consultantsexcessive use of consultants
2525
Public sector advisersPublic sector advisers
• Use specialist advice from the public Use specialist advice from the public authority’s internal departments or authority’s internal departments or advisersadvisers
• Establish protocols with national (or Establish protocols with national (or European) PPP knowledge centres, in European) PPP knowledge centres, in order to share scarce capacityorder to share scarce capacity
• Develop contacts and knowledge sharing Develop contacts and knowledge sharing protocols with similar contract protocols with similar contract management teams in other countriesmanagement teams in other countries
2626
66thth recommendation: recommendation:
Identify the initial and ongoing Identify the initial and ongoing training requirements training requirements
2727
Standard trainingStandard training
• Contract managementContract management• Risk managementRisk management• Performance monitoringPerformance monitoring• Efficiency auditing Efficiency auditing (value-for-money)(value-for-money)
• Benchmarking and market testingBenchmarking and market testing• CommunicationCommunication• Conflict management and negotiationConflict management and negotiation
2828
Specific trainingSpecific training
Typically internal training sessions:Typically internal training sessions:
• Testing proceduresTesting procedures• Preparing for persistent defaultPreparing for persistent default• Preparing for changes and variationsPreparing for changes and variations
Consider the possibility of holding inter-Consider the possibility of holding inter-national training eventsnational training events
2929
PPP knowledge transferPPP knowledge transfer
• Intra-ministerial PPP knowledge transfer Intra-ministerial PPP knowledge transfer (several contract mgt teams)(several contract mgt teams)
• Inter-ministerial PPP knowledge transfer Inter-ministerial PPP knowledge transfer (e.g. through the PPP Centrum)(e.g. through the PPP Centrum)
• Inter-national PPP knowledge transferInter-national PPP knowledge transfer
3030
77thth recommendation: recommendation:
Set up a contract management Set up a contract management manual manual
3131
The contract management The contract management manualmanual (1) (1)
Basic methodological items:Basic methodological items:
• Risk register and risk managementRisk register and risk management
• Performance monitoringPerformance monitoring
• Communication strategy and planCommunication strategy and plan
• Partnership protocols and behaviourPartnership protocols and behaviour
• Managing conflictManaging conflict
• Managing change and variationsManaging change and variations
• Contingency plansContingency plans
3232
The contract management The contract management manualmanual (2) (2)
Other items addressed in the Manual:Other items addressed in the Manual:
• Information interchange protocolsInformation interchange protocols
• Institutional contacts directoryInstitutional contacts directory
• Institutional reportingInstitutional reporting
• Rules for interface with stakeholdersRules for interface with stakeholders
• Invoice validation and paymentsInvoice validation and payments
• Contract management portfolioContract management portfolio
3333
88thth recommendation: recommendation:
Define the governance structure Define the governance structure
3434
Governance structureGovernance structure
• Define the structure of the contract Define the structure of the contract management teammanagement team
• Clarify roles (accountability, decision Clarify roles (accountability, decision making rules, clear responsibilities with making rules, clear responsibilities with no overlap)no overlap)
• Define reporting requirementsDefine reporting requirements
• Establish interfaces with the other Establish interfaces with the other stakeholdersstakeholders
3535
99thth recommendation: recommendation:
Manage variations to the contractManage variations to the contract
3636
Managing variationsManaging variations
Scrutinise requests for change:Scrutinise requests for change:• construction changesconstruction changes• reviewed output specifications and reviewed output specifications and
performance indicatorsperformance indicators• changes in law that have an impact on changes in law that have an impact on
service provisionservice provision
Evaluate cost implications, challenge the Evaluate cost implications, challenge the information provided by the private information provided by the private partner, and achieve best valuepartner, and achieve best value
3737
1010thth recommendation: recommendation:
Prepare contingency plansPrepare contingency plans
3838
Contingency plans (1)Contingency plans (1)
Prepare to deal with persistent default Prepare to deal with persistent default by the private partner:by the private partner:• Penalties and increased monitoringPenalties and increased monitoring• Step-in and management of the service Step-in and management of the service
by the public authorityby the public authority• Step-in by the financing partiesStep-in by the financing parties• Eventual termination of the contractEventual termination of the contract
3939
Contingency plans (2)Contingency plans (2)
Contingency plans should not be overly Contingency plans should not be overly complicated, and should consider:complicated, and should consider:
• Remedies for potential problemsRemedies for potential problems
• How to mobilise staff and resources at How to mobilise staff and resources at short noticeshort notice
• Consents which may be needed and from Consents which may be needed and from whomwhom
• Steps needed to return the project to Steps needed to return the project to normal monitoring after any eventnormal monitoring after any event
4040
Summary (1)Summary (1)
• Appoint the contract manager at an early Appoint the contract manager at an early stagestage
• Consider carefully the profile of the Consider carefully the profile of the contract managercontract manager
• Budget for contract management activitiesBudget for contract management activities
• Plan the staffing for contract management Plan the staffing for contract management activitiesactivities
4141
Summary (2)Summary (2)
• Refrain from excessive recourse to Refrain from excessive recourse to external consultantsexternal consultants
• Identify the initial and ongoing training Identify the initial and ongoing training requirementsrequirements
• Set up a contract manag’t manualSet up a contract manag’t manual• Define the governance structureDefine the governance structure• Manage variations to the contract Manage variations to the contract • Prepare contingency plansPrepare contingency plans
4242
Thank you
Rui Sousa MonteiroRui Sousa Monteiro
Parpública SParpública SAARua Laura Alves, 4, Rua Laura Alves, 4, 88º, 1050-138 Lisboaº, 1050-138 Lisboa, Portugal, Portugalteltel:: (+351) 217 (+351) 217 950950 507507, (+351) 969 845 042, (+351) 969 845 042faxfax:: (+351) 217 817 170 (+351) 217 817 170e-mail: e-mail: [email protected]@parpublica.pt
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