Effective Management Essential to Unlocking Value Behind Infrastructure PPPs
SYDNEY – Stronger public sector oversight and contract management are essential to realising the true value of investment through public private partnerships (PPPs), according to new guidance from the Global Infrastructure Hub.
The G20 initiative today launched its Public Private Partnership (PPP) Contract Management Tool—a free online resource that provides practical, user-friendly guidance for public officials in charge of managing PPP infrastructure projects after financial close, through construction and operations.
CEO of the Global Infrastructure Hub, Chris Heathcote, said that governments need to focus on the importance of managing PPP infrastructure projects to ensure that the public is receiving the full benefit of the infrastructure services.
“A great deal of attention is paid to the preparation, procurement and negotiation processes of PPPs”, Mr Heathcote said.
“However, this is only the start of delivering a successful project, and in many ways the hard work begins after financial close. Simply signing a PPP contract and letting it run its course will not automatically lead to the private sector delivering the public service to the level of quality expected, and has the potential to undermine the entire process of project preparation and procurement.”
Governments need to monitor the obligations of a private sector operator and ensure that scope changes are managed effectively to ensure value for money and minimise the risk of disputes, according to the Global Infrastructure Hub. Governments also need to ensure that community stakeholders are consulted in relation to disruptions through construction and operations.
The aim of the PPP Contract Management Tool is to help government officials address these types of challenges and prevent potential setbacks and disruptions throughout the construction and operations phases of a project.
Mr Heathcote stressed that procuring authorities need to ensure PPP contract management teams are well-resourced, and that adequate training is provided to the officials responsible for handling both day-to-day management issues, and the significant challenges that can arise, such as requests for renegotiation.
“Our research finds that up to 48 per cent of PPP contracts globally are renegotiated within the first 12 years. The key issues associated with renegotiation are that they don’t typically benefit from a competitive tender process and often lack transparency.
“Therefore, it’s important that the government’s contract management team has the capacity and resources required to successfully manage a renegotiation.”
The Global Infrastructure Hub tool, which has been created with global professional services consultancy Turner & Townsend, provides practical guidance to increase the quality of PPP infrastructure investments internationally.
Murray Rowden, Regional Managing Director, Americas & Global Head of Infrastructure at Turner & Townsend, said: “Public Private Partnerships offer a huge opportunity to unlock infrastructure investment, but these long-term programmes require a long-term view if they are to deliver for all parties.
“Learning from past examples, the tool sets out the skills and expertise required to both procure and manage programmes across their whole lifecycle – ensuring that infrastructure assets are set up for success from day one.”
The project has been informed by an in-depth interrogation of 250 infrastructure PPPs reaching financial close between 2005 and 2015 to understand their successes and challenges. The research programme included three global workshops with government participants from over 30 countries, as well as multilateral development banks, including the World Bank, the Inter-American Development Bank and the European Investment Bank, and infrastructure legal practitioners from King & Wood Mallesons and Norton Rose Fulbright.
The full PPP Contract Management Tool can be found at: https://managingppp.gihub.org/
About the Global Infrastructure Hub
Launched in 2014 by the G20, the Global Infrastructure Hub is an organisation dedicated solely to infrastructure in both developed and emerging markets. The global challenge remains acute given population growth, increasing urbanisation, and a need to replace ageing infrastructure. We are helping governments unlock trillions of dollars in private investment to fund much-needed public infrastructure, creating productive economies and more liveable cities. We work with both public and private sectors to facilitate knowledge-sharing, highlight reform opportunities, support the adoption of leading practices and help to build the global pipeline of quality, bankable infrastructure projects. We are independent and provide all our tools and services on an open and free to access platform. For more information, visit: http://gihub.org
About Turner & Townsend
Turner & Townsend is an independent professional services company specialising in programme management, project management, cost and commercial management and advisory across the real estate, infrastructure and natural resources sectors.
With 108 offices in 45 countries, we draw on our extensive global and industry experience to manage risk while maximising value and performance during the construction and operation of our clients’ assets.