Samantha Fuller and Nia Swift of Service Works Global talk to FM magazine, Australia’s leading online and printed bi-monthly publication, about using integrated payment mechanisms to improve operational performance in PPPs. The article below was published in the magazine’s December / January edition.
As Australia’s PPP market continues to grow and evolve, measures must be taken to manage performance and maximise efficiencies in the operational phase of the contract for its duration. Managing complex contract terms and maintaining data integrity using spreadsheets is challenging. Add in the need to provide transparency and auditability and spreadsheets are underwhelming to say the least.
A well implemented O&M (operations and maintenance) software system can offer an alternative to the mayhem of spreadsheets. Through the management of asset lifecycle data to the automatic calculation of deductions, an O&M system is an enabler to robust contract management. Not only are deduction failures easier to manage, access to the data affecting the whole contract will help to provide value for money through benchmarking, trend reporting and financial management.
Operation and maintenance (O&M) software has opened up new possibilities for contract management, becoming cornerstone apparatus into which other systems can be linked. For example, many organisations are now using mobile devices to manage work and operatives remotely, and integration with systems like building management systems (BMS) and building information modelling (BIM) is providing seamless information flow and increased visibility to improved building performance.
A fully integrated payment mechanism manages the financial element of the O&M process by reporting against the agreed parameters for measuring KPIs and SLAs as well as quantifying the pain share / gain share incentive. Well implemented software should be capable of automatically calculating availability, service and quality failures against a variety of measurement values such as percentages, points, priorities, caps and thresholds. It should be capable of calculating repeat deductions and ratchets whilst automatically applying multiple payment mechanism rules. The deductions should be generated in real time, capable of calculating over multiple time periods and displaying in multiple report formats.
By implementing an integrated payment mechanism, the system data is not required to be exported and manipulated outside of the O&M system to produce the required reports. Instead, deductions are automatically calculated and displayed in system embedded report(s) without leaving the system. This method of protecting the integrity of the data provides the most trustworthy flow of auditable information creating an ethos of trust amongst the project stakeholders and an environment in which a successful partnership can flourish.
Creating a well-calibrated payment mechanism – a partnership approach
It is crucial that a software provider with extensive payment mechanism experience is sourced with a proven record of having the ability to accurately translate the legal and financial requirements of the contract schedules into the O&M software. A comprehensive due diligence process should underpin the development and implementation of the payment mechanism resulting in a comprehensive specification which has been understood, agreed and signed off by all stakeholders.
Nia Swift, Director at Service Works Global has worked with over 200 contracts across the world.
“We’ll often find clauses that don’t appear to make sense when applied in an operational environment, or ambiguities that carry an element of risk. It is always better to flush out the grey areas, create realistic examples illustrating different options and have an open debate with the stakeholders so that agreement can be reached early in the process. Emphasising that the spirit of a PPP contract is to deliver improved services and better value for money primarily through appropriate risk transfer is a good place to start. Furthermore, emphasising that innovation, greater asset utilisation and integrated whole-of-life management should be the continued aim throughout the contract’s duration helps focus attention on what is important”.
The measurement of success
Access to transparent, auditable information and a strong performance management process underpinned by an integrated payment mechanism places the contract on more sustainable footing for the long term. O&M software can strengthen the operational partnership of a PPP, providing an audit trail for compliance purposes and by providing measurable cost savings, improvements in time control and higher productivity.
For more information about contract performance management for PPPs or FM, or to request a complimentary white paper, ‘Implementing O&M Software for Effective PPP Contract Management’, email email@example.com or call +44 020 8877 4080.