Management/Operation and Maintenance Contracts
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Management contracts and Operation and Maintenance (O&M) contracts are contracts governing a type of public-private partnership (PPP) agreement. This section explains key features of this type of arrangement, provides sample contracts, bidding documents and checklists.
The term "management contract" has been applied to cover a range of contracts from technical assistance contracts through to full-blown operation and maintenance agreements and so it is difficult to generalize about them. The main common features are that the awarding authority engages the contractor to manage a range of activities for a relatively short time period (2 to 5 years). Management contracts tend to be task specific and input rather than output focused. Operation and maintenance agreements may have more outputs or performance requirements. The simplest management contracts involve the private operator being paid a fixed fee by the awarding authority for performing specific tasks - the remuneration does not depend on collection of tariffs and the private operator does not typically take on the risk of asset condition. Where the management contracts become more performance-based, they may involve the operator taking on more risk, even risk of asset condition and replacement of more minor components and equipment. Also check: For an analysis of whether a management contract is the most appropriate solution in a given situation, go to Benefits and Risks of PPPs. The World Bank has developed a Standard Form Management Contract together with Bidding Document and Technical Note recommended for use on water and energy projects the Bank is funding. Also included is a Technical Note discussing management contracts and their preparation. Go to the General Conditions in the Bidding Documents for the contract itself. For a viewpoint of a management contract working in practice in the water sector in Venezuela, please check Management Contracts and Water Utilities: The Case of Monagas State in Venezuela. Please see the Water & Sanitation PPP section for multiple examples of water management / O&M contracts, as well as other types of PPP agreements in that sector. The World Bank has developed a Standard Form Management Contract together with Bidding Document and Technical Note recommended for use on water and energy projects. Go to the General Conditions in the Bidding Documents for the contract itself. The following have been developed for a World Bank funded project looking at the introduction of private sector operator in the electricity sector through a management contract: Checklist of the legal due diligence issues that should be addressed by local lawyers in preparing an electricity management contract: Due Diligence Checklist. The guidance in Operation and Maintenance Strategies for Hydropower: Handbook for Practitioners and Decision Makers is structured though a step-by-step approach to operation and maintenance (O&M) strategy development and implementation. The Handbook for practitioners and decision makers seeks to raise awareness among utility managers, decision makers, and other stakeholders of the importance and benefits of developing robust operation and maintenance (O&M) strategies for existing and greenfield hydropower plants. There are a number of existing arrangements in place which resemble operating or franchise agreements for trams and rail. For examples, look at: The Road Geohazard Risk Management Handbook outlines an approach to proactively manage the risks of geohazards on roads, road users, and the people living near and affected by road. Part V in the Handbook, Operations and Maintenance, focuses on the operations and maintenance aspects of geohazard management whether the maintenance of previously engineered solutions or the nonengineered solutions available to mitigate the impacts of geohazard risks The World Bank Sample Bidding Document for Management and Maintenance of Roads - Request for Bids (RFB) - Works - Roads (Output and Performance -Based Road Contracts - OPBRC) has been prepared for the use in contracts financed by the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The SPD derives from the Master bidding document for Procurement of Works.What Are Management and "Operation and Maintenance" Contracts?
Key Features of Management/O&M Contracts
Example Management/O&M Contracts by Sector
Water and Sanitation
Power
Rail and Trams
Roads
Related Content
PPP Arrangements/Types of PPP Agreements
Page Specific Disclaimer*Note: Although the key features of each category are summarized, there is overlap between the categories and the name given to a particular agreement may not reflect this classic categorization. Care should also be taken to identify whether a specific classification is enshrined in the laws of the host country, as in the case of many civil law jurisdictions where there are strict definitions of "concessions" and "affermages". The sample agreements included in this section are not the full range of agreements associated with infrastructure projects. They agreements are NOT intended to be used as "models". Legal advice should be sought in the preparation and drafting of an agreement to ensure that it is appropriate and workable in the circumstances of a particular project, sector and country. Find Terms and Conditions of this website here.
KeywordsUtility Restructuring, Corporatization, Decentralization, and Performance Contracts
Type of ResourceCivil Works and Service Contracts
Type of ResourceManagement/Operation and Maintenance Contracts
Leases and Affermage Contracts
Type of ResourceConcessions Build-Operate-Transfer (BOT) and Design-Build-Operate (DBO) Projects
Type of ResourceJoint Ventures / Government Shareholding in Project Company
Type of ResourceFull Divestiture / Privatization
Type of ResourceContract Plans / Performance Contracts
Type of ResourceStandardized Agreements, Bidding Documents and Guidance Manuals
Type of Resource
Additional Resources
Energy and Power PPPs
Type of ResourceRailway PPPs
APMG PPP Certification Program Guide