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PublicPrivate Partnerships in the Czech Republic Setting up a proper risk management system at the p

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During procurement, the project manager is typically not ... Skills and experience. Project management skills. Analytical skills. Negotiation skills ... – PowerPoint PPT presentation

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Title: PublicPrivate Partnerships in the Czech Republic Setting up a proper risk management system at the p


1
Public-Private Partnerships in the Czech
RepublicSetting up a proper risk management
system at the project level
  • Twinning Project CZ/2005/IB/FI/04
  • Training event on risk management in PPP projects
  • Prague, Ministerstvo financí, 26 May 2008
  • Rui Sousa Monteiro
  • (Parpública SA, Portugal)

2
Contents
  • Risk management during procurement and after
    contract close
  • 10 recommendations for setting up a proper risk
    management system
  • On selecting and appointing the contract manager
  • On budgeting, staffing, and planning for contract
    management activities
  • On methodology and governance

3
  • We know that risk management is critical for PPP
    efficiency

4
Risk managersand PPP projects (1)
  • Both theory and experience tell us
  • that appropriate risk allocation is essencial for
    PPP efficiency,
  • that risk allocation clauses are critical during
    procurement, and
  • that risk must be properly managed during the
    whole life of the contract

5
Risk managersand PPP projects (2)
  • Risk allocation should be carefully addressed
    from the outset of the contract
  • ? the project leader should manage risks during
    procurement
  • After contract close, risk management is still
    critical
  • ? the contract manager should address risk
    management

6
  • In general terms, risk management is at the core
    of PPP procurement

7
  • But PPP contract management typically does not
    incorporate enough resources and capacity for
    effective risk management

8
  • 1st recommendation
  • Avoid appointing the contract manager just before
    (or after) contract close

9
From procurement to contract management
  • Lack of continuity between procurement management
    and contract management creates two problems
  • During procurement, the project manager is
    typically not sufficiently concerned with the
    operational phase
  • After contract close, the contract manager is not
    well acquainted with the contract

10
When to appoint thecontract manager (1)
  • A good practice is to appoint the contract
    manager prior to the end of the competitive phase
    of procurement, in order to
  • Review the draft contract, addressing contract
    management details and reviewing risk allocation
  • Set up the contract management arrangements

11
When to appoint thecontract manager (2)
  • In fact, public authorities tend to delay the
    appointment of contract managers
  • Because of financial and staff constraints
  • Because they fear conflict between the
    procurement manager and the contract manager

12
  • 2nd recommendation
  • Consider carefully the profile of the contract
    manager

13
Contract manager profile
  • Seniority
  • Adequate skills and experience
  • Team leadership
  • Openness to change and innovation
  • Strong ability to keep the focus on the provision
    of service, not getting lost in details and daily
    routine

14
Seniority
  • The contract manager must be perceived (by all
    stakeholders) as a person with a senior status,
    holding the appropriate ability to engage in
    contacts and negotiations with all the relevant
    entities

15
Skills and experience
  • Project management skills
  • Analytical skills
  • Negotiation skills
  • Communication skills
  • Financial skills

16
  • 3rd recommendation
  • Budget for contract management activities

17
Budgeting forcontract management
  • The project manager should include in the
    business case a realistic estimate of the needs
    and costs that the public authority in charge of
    the contract will incur for contract management
  • (including staff, training, consultants)

18
  • 4th recommendation
  • Plan the staffing for contract management
    activities

19
Staffing forcontract management
  • The public authority in charge of the contract
    should plan the hiring and retaining of staff,
    looking for
  • skills and experience
  • capacity building and knowledge transfer
  • continuity of staff

20
Skills and experience
  • Analytical skills and good human relations
  • Legal (administrative law , contract law, public
    procurement, competition law)
  • Economics (efficiency in procurement, project
    finance, financial modelling, game theory,
    incentive analysis)
  • Management (risk management, performance
    monitoring, auditing, benchmarking, market
    testing)

21
Capacity building
  • Initial and ongoing training
  • Knowledge sharing and transfer, between PPP
    contract management teams, and between them and
    PPP knowledge centres
  • Integrate international PPP knowledge networks

22
Continuity of staff
  • Avoid too high turnover of staff
  • Facilitate reciprocal transfer of staff between
    similar PPP contract management teams
  • Care for skill retention
  • Care for information retention

23
  • 5th recommendation
  • Refrain from excessive recourse to external
    consultants

24
External consultants
  • Balance carefully the creation of internal
    capacity and the use of external advisers and
    consultants, developing and retaining skills in
    house
  • Act as an intelligent client, avoiding excessive
    use of consultants

25
Public sector advisers
  • Use specialist advice from the public authoritys
    internal departments or advisers
  • Establish protocols with national (or European)
    PPP knowledge centres, in order to share scarce
    capacity
  • Develop contacts and knowledge sharing protocols
    with similar contract management teams in other
    countries

26
  • 6th recommendation
  • Identify the initial and ongoing training
    requirements

27
Standard training
  • Contract management
  • Risk management
  • Performance monitoring
  • Efficiency auditing (value-for-money)
  • Benchmarking and market testing
  • Communication
  • Conflict management and negotiation

28
Specific training
  • Typically internal training sessions
  • Testing procedures
  • Preparing for persistent default
  • Preparing for changes and variations
  • Consider the possibility of holding
    inter-national training events

29
PPP knowledge transfer
  • Intra-ministerial PPP knowledge transfer (several
    contract mgt teams)
  • Inter-ministerial PPP knowledge transfer (e.g.
    through the PPP Centrum)
  • Inter-national PPP knowledge transfer

30
  • 7th recommendation
  • Set up a contract management manual

31
The contract management manual (1)
  • Basic methodological items
  • Risk register and risk management
  • Performance monitoring
  • Communication strategy and plan
  • Partnership protocols and behaviour
  • Managing conflict
  • Managing change and variations
  • Contingency plans

32
The contract management manual (2)
  • Other items addressed in the Manual
  • Information interchange protocols
  • Institutional contacts directory
  • Institutional reporting
  • Rules for interface with stakeholders
  • Invoice validation and payments
  • Contract management portfolio

33
  • 8th recommendation
  • Define the governance structure

34
Governance structure
  • Define the structure of the contract management
    team
  • Clarify roles (accountability, decision making
    rules, clear responsibilities with no overlap)
  • Define reporting requirements
  • Establish interfaces with the other stakeholders

35
  • 9th recommendation
  • Manage variations to the contract

36
Managing variations
  • Scrutinise requests for change
  • construction changes
  • reviewed output specifications and performance
    indicators
  • changes in law that have an impact on service
    provision
  • Evaluate cost implications, challenge the
    information provided by the private partner, and
    achieve best value

37
  • 10th recommendation
  • Prepare contingency plans

38
Contingency plans (1)
  • Prepare to deal with persistent default by the
    private partner
  • Penalties and increased monitoring
  • Step-in and management of the service by the
    public authority
  • Step-in by the financing parties
  • Eventual termination of the contract

39
Contingency plans (2)
  • Contingency plans should not be overly
    complicated, and should consider
  • Remedies for potential problems
  • How to mobilise staff and resources at short
    notice
  • Consents which may be needed and from whom
  • Steps needed to return the project to normal
    monitoring after any event

40
Summary (1)
  • Appoint the contract manager at an early stage
  • Consider carefully the profile of the contract
    manager
  • Budget for contract management activities
  • Plan the staffing for contract management
    activities

41
Summary (2)
  • Refrain from excessive recourse to external
    consultants
  • Identify the initial and ongoing training
    requirements
  • Set up a contract managt manual
  • Define the governance structure
  • Manage variations to the contract
  • Prepare contingency plans

42
Thank you
  • Rui Sousa Monteiro
  • Parpública SA
  • Rua Laura Alves, 4, 8º, 1050-138 Lisboa, Portugal
  • tel (351) 217 950 507,  (351) 969 845 042
  • fax (351) 217 817 170
  • e-mail rui.monteiro_at_parpublica.pt
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