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Module 4 -18 Managing PPPs

18.1 Why is contract management important?
18.2 Who manages the contract?
18.3 What are the roles of stakeholders during contract management?
18.4 Renegotiation
Further Guidance

Key Questions:

Why is contract management important?
Who manages the contract?
What are the roles of stakeholders during contract management?
Why to conduct renegotiation?

Related Tools:

4 Collecting Information
6 Defining Objectives

Implementation – Managing PPPs

18.3 What are the roles of stakeholders during contract management?

This section highlights in detail the roles of key actors during the implementation stage of the contract.


Municipalities are in a unique position in PPPs. On the one hand, they are dependent on the private sector’s investments and its efficiency, and on the community’s willingness to participate in the partnership. On the other, municipalities have enormous power as the initiators of partnerships, because they determine the scope, nature, extent of the partnership and actors involved.

Experience shows that municipalities assume different roles in different service sectors and at different stages of a project’s development. The management and monitoring stage of the partnership project is no different in this respect – the municipality’s role will depend on the type of arrangement, service and the contract.

Once a contract has been awarded to a private company, it is that company’s job to run the business. The government should maintain its involvement as a regulator, applying the necessary pressure for the company to perform as agreed. However, the regulator must not become a business manager. There should be a clear separation between the roles and responsibilities of the regulator and those of the service providers. The focus should be on what the contractor needs to achieve, not on how to achieve it. For example, it is the regulator’s task to specify a standard for drinking water quality and to establish a system for monitoring performance against this standard. It is then the company’s task to decide what technical measures and operating practices are needed to meet the standard.

Who is involved?
◊ A management team
◊ Regulator
◊ Consumer
◊ Private sector

The regulator is responsible for detailed specification and enforcement of the government’s policies. However, it should enjoy enough independence to be guided by technical, economic and financial criteria, rather than by political considerations in regulating services. The regulator’s main responsibilities during contract management are to:

  • enforce competition policy;
  • monitor and enforce adherence to rules and standards for cost recovery, service quality, coverage targets and consumer relations;
  • negotiate tariff changes and approve tariff adjustments regularly in accordance with clearly established rules;
  • approve investment plans and monitor their execution;
  • publish information about the award of contracts, the quality of services and tariffs;
  • inform consumers about their rights and obligations;
  • serve as an appeals body for consumer complaints;
  • resolve conflicts among service providers; and
  • advise policymakers as regards policies to improve services and promote efficiency.

The municipality is more effective as a partner when it possesses in-depth knowledge of the details of the contract and is involved actively in the management of the project. Moreover, the effectiveness of the municipality’s strategic decisions correlates with its understanding of the contract options, scope and the potential of the private sector’s involvement.


Community consultation, being an essential element of the pro-poor partnerships, is especially important during the contract management stage. There are many examples of how projects designed to solve infrastructure problems have failed because there was no substantive involvement of community groups; such involvement could have shown at an early stage how the proposed project would actually provide benefits or how it might produce new problems for the community.

Under the PPP arrangement, the role of consumers is enhanced for several reasons.

  • Services become more consumer-oriented – that is, aimed at satisfying the needs and desires of consumers in accordance with their willingness-to-pay. This is a key element in ensuring the financial and economic viability of services.
  • One of the regulator’s objectives is to motivate consumers to use services efficiently. The most effective instrument for achieving this goal is the tariff. However, consumer education is also a powerful instrument as an accompaniment to tariff policy. Accurate information about the cost of services helps consumers to make appropriate decisions about the level of service they use and how they use it.
  • Feedback from consumers is a highly cost-effective and powerful source of information for the regulator in judging the quality of services and the satisfaction levels of consumers.

Thus, consumers’ responsibilities and privileges are expanded within a PPP arrangement to include:

  • payment for services;
  • abiding by the rules of service provision and using services efficiently;
  • expressing their need for services and their willingness to pay for them; and
  • providing feedback on the adequacy of services and in turn receiving a quick response to their complaints.

All these roles require little in the way of organisation on the part of consumers, as they can be involved in this manner via phone, mail or questionnaires. However, a higher degree of organisation is possible through so-called consumer committees.

Consumer committees…

…are set up to help the regulating agency responsible to better understand and address emerging consumer needs and views. The role of the consumer committee includes:

  • commenting on the agency's strategic objectives and plan;
  • giving feedback on the effectiveness of its policies; and
  • advising on how to reach and consult vulnerable and hard-to-reach groups.

Some members are appointed through open competition and some are nominated representatives from each of the existing consumer organisations.

The municipality should not be allowed to consider the requirements of the poor and addressing poverty-related issues as merely politically correct add-ons to the contract, which can then be discarded at a later date through lack of understanding.

<– Defined roles of each partner at the contract
management stage
<– Renegotiation option and its elements

Private sector

Private sector managers should have adequate autonomy to control outcomes. Their rights and obligations as the contractors in the partnership arrangement should include in most cases:

  • provision of appropriate services at a reasonable cost to all who are willing to pay for them, or to those people for whom partial or full payment is made by a third party;
  • maintenance and renewal of infrastructure;
  • charging and collection of tariffs, which should cover the full cost of efficient services;
  • day-to-day management, including staffing and use of operating and financial resources, subject to due process, proper accounting practices and so on;
  • meeting service targets and environmental and health standards;
  • planning and execution of investment programmes once they have been approved;
  • proposal of tariff increases to their boards of directors for submission to the regulatory authorities;
  • providing timely responses to consumer enquiries and complaints; and
  • submission of periodic reports as required by the regulatory authorities.



  S T A R T P A G E  
  Module 1 - Before PPPs  
  01-Starting Out  
  02-Strategic Planning  
  Module 2 - Preparation Stage  
  03-Planning & Organising  
  04-Collecting Information  
  Module 3 - PPP Development Stage  
  05-Identifying Constraints  
  06-Defining Objectives  
  07-Defing Parameters (Scope)  
  08-Establishing Principles  
  09-Identifying Partners  
  10-Establishing Partnership  
  11-Selecting Options  
  12-Financing (Investment)  
  13-Financing (Cost Recovery)  
  14-Preparing Business Plans  
  15-Regulating the PPP  
  Module 4 - Implementation  
  16-Tendering & Procurement  
  18-Managing PPPs  
  19-Monitoring & Evaluation  
  20-Managing Conflict  
  21-Capacity Development  
  Contact Information