Comparative Study of Contractual Clauses to Provide for the Smooth ...

Comparative Study of Contractual Clauses for the Smooth Adjustment of PhysicalInfrastructure and Services through the Lifecycle of a PPP ProjectAugust 20125 Managing VariationsAlthough PPP contracts allow flexibility for changes in the physical infrastructure or theservices, this flexibility is only effective if government appropriately manages the variationprocess.Key principles applicable to managing variations (and PPP contract management moregenerally) include 18 :Understand the contract: Government’s contract management team should ensurethat they understand the PPP contract. This is essential not only to ensure that rightsand obligations in relation to variations are being honoured, but also to verify that avariation request is actually a change and not covered under the existing agreementand pricing structures.Adopt a strategic approach to variations: Government should adopt a strategicapproach to variations and control the flow of variations to avoid overstretchingresources on either the government side or private party side of the contract. Forexample, government can consider bundling similar variations together to reducecosts, or planning a variation programme based on anticipated needs.Ensure variation requests are clear and comprehensive: Government shouldprovide its private sector partners with proper briefs to make it clear whatgovernment wants done. This is especially important for larger, more complexvariations. For complex variations, government should consider initially havinginformal non-binding discussions with the private party in order to better understandthe private party’s ability to implement the variation, prior to issuing a formal variationrequest. These informal discussions can enable government to then prepare a formalvariation request that gives the private party the information it needs to enable it tofully evaluate the variation and provide a detailed plan for its implementation.Establish clear and appropriate roles and responsibilities for requesting andassessing variations: Government should ensure that appropriate staff have theauthority to request and authorise variations, and that staff who do not themselveshave the authority to request variations understand this. Potential variations shouldbe assessed thoroughly by suitably experienced personnel, who should consult withrelevant stakeholders.Maintain good record keeping practices: Government should keep good recordsof the variations and payments made, and ensure that agreed variations are clearlydocumented with the private party.Maintain a spirit of partnership: Both government and the private party shouldcomply with their obligations under the PPP contract, but in doing so they canachieve better outcomes by maintaining a spirit of partnership:18 See generally Infrastructure Australia, “National PPP Guidelines: Volume 2 – Practitioners’ Guide”(April 2011), section 7 and appendix H. (Available athttp://www.infrastructureaustralia.gov.au/public_private/files/Vol_2_Practioners_Guide_Mar_2011.pdf); National Audit Office, “Making Changes in Operational PFI Projects” (17 January 2008), pages 20-21. (Available at http://www.nao.org.uk/publications/0708/making_changes_operational_pfi.aspx.)Page 26 of 35Foster Infrastructure