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Survey results - O&M phase of PPP projects

In many countries around the world, public-private partnership (PPP or P3) contracts have become established as a successful way of delivering new public infrastructure and related services. In the most developed PPP markets, such as those of Canada, the United Kingdom and Australia, the PPP model has enabled a transformation of public facilities. The private sector has subsequently delivered hundreds of new hospitals, schools, prisons, roads, bridges, railways, defence systems and government offices, among many other things.

With such a large proportion of public infrastructure built, maintained and in many cases operated under PPP contracts, decision-makers’ attention is shifting from ‘doing deals’ to ensuring value for money in the long term. A key part of the promise of PPP is the focus on it achieving value for money over the project’s lifecycle, helping to avoid the widespread tendency of governments to underinvest in operations and maintenance (O & M) activities.

Over 200 industry professionals worldwide took part in a PPP survey run by SWG in collaboration with Partnerships Bulletin, CCPPP and NCPPP, representing every major part of industry including central and local government officials, including central and local government officials, financial and technical advisers, construction and facilities management professionals, and equity and debt investors.

Key Messages from the Survey:

  • Managing the operational phase of PPP contracts is now an important part of the working lives of industry practitioners – especially for those engaged in the most developed PPP programmes. At a global level, 40% of our respondents spend more than half of their time on this phase. This is over 60% in the most developed markets, such as Canada and the United Kingdom.
  • As these markets have developed, the public and private sectors have become more familiar with those on the other side of the table. Our survey results suggest that, in general, the public sector is relatively content with their private sector counterparts in terms of their performance in managing the contract. In Canada and the United Kingdom, the numbers of respondents reporting very good or good performance versus satisfactory or poor, are roughly equal.
  • The experience of managing operational projects is one of success – but there have been challenges, and information is key. Differences in contract interpretation were noted by the largest proportion of respondents as a key risk, followed by poor contract documentation. These results, shared across regions and countries, seem to confirm the view that any ambiguity in the performance management framework present the greatest risk to the success of the contract.
  • New pressures are emerging that impact on the operational phase of PPP contracts. Public authorities in many countries are on the lookout for possible efficiencies in service delivery that can reduce their costs. The vast majority of respondents – and especially those in the developed markets of Canada and the United Kingdom – reported at least some degree of pressure to reduce prices on operational projects.
  • Price reductions do not guarantee better value for money. Most respondents questioned whether better value for money would be a common outcome from price reductions. One respondent pointed out: “If it is not managed properly, it may lead to a strain in the relationship, and subsequent future disagreements which cannot be settled by mutual agreement, but by adjudication or arbitration”. This is a comment supported by our survey, which found that that 26% of respondents have witnessed contracts they are engaged in, falling into dispute.

The findings of the survey depict an industry in transition – one in which the operational phase of a PPP is an increasingly important concern among industry practitioners. As markets have developed, the public and private sectors have become more familiar with those on the other side of the table – but there remain instances of poor working relationships and mutual mistrust. To resolve these, the quality of information available to all parties is a crucial element for a successful project. The PPP survey respondents see disagreements rooted in contractual documentation and divergent interpretations as the risks to long-term success.

Request the full version of Service Works Global’s PPP Projects in Their Operational Phase Survey, by clicking here.

Service Works’ P3rform software is a complete performance management software solution designed for the smooth running of the operation and maintenance (O&M) phase of a public-private partnership contract. For more information click here, or request a demonstration here.