Contract Management in Asset Recycling
Asset recycling transactions involving a long-term concession or lease of an asset to a private partner constitute a long-term commitment by the private sector to operate and maintain, and sometimes redevelop and/or expand, a Relevant Authority's existing infrastructure project to deliver services to the public or the Relevant Authority. These activities are governed by the project agreements.
As a result, effective delivery of the transaction hinges on the ability of both the Relevant Authority and the private sector party to execute their responsibilities, as outlined in the project agreements. Even if a contract is drafted in accordance with international best practice and industry standards, the parties’ objectives may not be achieved if the contract is not underpinned by effective contract management and performance monitoring over the life of the project.
This calls for an effective approach for managing the project agreements / contracts at every stage of the project term.
Contract management overview
Contract management defines the processes and procedures which the contracting parties follow in order to:
meet their respective obligations;
demonstrate their compliance with these obligations to their counterparts; and
monitor the compliance of their counterparts with the counterparts' obligations.
Collectively, these efforts are intended to ensure that the contracting parties work towards the project objectives. Effective contract management ensures that the users of the project (the general public, customers, riders or, in some cases, the Relevant Authority itself) continue to obtain the services set out in the output specification of the project agreement. The contract management process should also set out relevant measures that can be used to monitor the risk profile of the project.
This section details the guidelines for effective contract management, which will identify, monitor and manage all risks over the life of the contract to assist in achieving project objectives.
For those projects deemed to have medium to high-climate related risks it is wise to include climate change / climate resilience expertise as part of the contract management team.