Performance monitoring is a key aspect of the Procuring Authority’s role in managing the PPP contract. The principal objective of performance monitoring is to ensure that the Procuring Authority is receiving the service the Project Company has agreed to deliver, and to confirm the risk allocation on an ongoing basis as agreed in the PPP contract.
A key benefit of the PPP model is that significant risk is transferred to the Project Company because it is well-placed to, manage that risk more efficiently. The Project Company is typically responsible for both construction and operation of the project assets, and is best placed to engage and manage its contractors and the involvement of other stakeholders. The priority of the Procuring Authority is therefore to ensure that the performance monitoring mechanisms set out in the PPP contract are properly followed, and that risk as allocated in the contract remains with the Project Company. The resources required from the Procuring Authority should not be underestimated.
This section provides a background to performance monitoring in Subsection 3.2.1 (Background) and provides guidance on managing the performance of the Project Company. The key elements to successfully managing performance are summarised below and detailed in Subsection 3.2.2 (Guidance):
A. Ensure adequate resourcing is employed for performance monitoring activities
B. Utilise interim construction milestones to stay well-informed on the progress of works
C. Be aware of and use the most efficient performance monitoring tools, including automated reporting
D. Use KPIs and payment mechanisms to ensure the Project Company is performing in accordance with the PPP contract, not as punitive measures
E. Assess the operational effectiveness of KPIs before operations commence or early in the operations phase, and on an ongoing basis
F. Clarify the intended application of KPIs that are perceived as being unclear or ambiguous with the Project Company
G. Closer performance monitoring will be required for risks that cannot be transferred to the private sector due to their inherent nature
H. Keep good records of performance data for use more broadly