A public sector governance model for public private partnership: integrating partnership, risk and performance management in the operating phase

Under Public Private Partnership (PPP) arrangements, real benefits, in terms of Value-for-Money (VfM) outcomes, are expected to flow to communities. The public sector partner is ultimately responsible for ensuring that contracted services provided by private consortia are carried out and that specified delivery standards are met. Contracts, however, do not protect governments from every adverse eventuality. Partnerships involve managing social interactions between people in administering contractual provisions. Not all operational risks can be transferred to consortia; governments should actively manage their risk positions. Governments should take necessary and timely action to resolve service provider under-performance whenever it occurs.

This research has two main objectives. The first is to examine how PPP operational phase partnership, risk and performance management practices can be improved to achieve better VfM outcomes. This involves developing a generic conceptual integrating model, intended to assist government decision-makers to allocate and make better use of public sector resources during the operational phase of PPPs, that may have significant and / or long-term consequences for achieving strategic objectives using an integrated partnership, risk and performance management approach. The second objective is to test the logic and sufficiency of the model by exposing it to industry practitioner review and comment.

The underlying research methodology is phenomenology, and divides into two main phases using qualitative mixed methods commencing with literature review to facilitate the initial conceptualisation of the proposed model. Semi-structured interviews were then used to gather the data required for development. A second iteration of the model was presented to an expert focus group for scrutiny and comment, and feedback from this group was used to refine the third and final iteration of the model. The research sample was drawn from eligible persons from the Australian Government, three Australian state jurisdictions, the Government of the United Kingdom, as well as selected private sector participants.

The most significant findings for this research are two-fold. First, there is a link between the public partner’s contract management style for achieving VfM and organisational culture i.e. ‘give and take’ relationship management and ‘black letter’ contract enforcement. Organisational culture, however, is not always driven by the preferred contract management style of the public partner: ‘you get what you pay for’. Second, sufficiently skilled and experienced public partner employees are critical for achieving VfM outcomes. This research demonstrates a range of factors that can undermine value for the state over the longer-term or lead to an adverse change in the public partner’s risk profile.

This research contributes to the advancement of the ‘body of knowledge’, with respect to public partner governance of PPP in the operating phase. This includes: identifying critical success factors that lead to the achievement of VfM outcomes, thus building upon existing partnership, risk and performance management knowledge, policy and guidance for PPPs; and developing an Integrated Management Model as a tool – that supports the contract administration manual – to enhance the development of internal and external improvement plans as well as improving the operational management of partnership, risk and performance elements.