At most Public-Private Partnership (PPP) conferences, the spotlight falls on procurement, financing and project bankability. But at the Unlocking Investment Through PPPs Summit, Edward Farquharson turned attention to what happens after the deal is signed.
Drawing on three decades of infrastructure finance experience – and his current role as Senior Adviser at the European Investment Bank (EIB) – Farquharson made a pointed observation: This is when most problems really begin.
A publication edition containing an overview of what was discussed during the summit is now available online. You can find it here.
For many public authorities, financial close marks the celebratory end of a complex process. But for Edward Farquharson, it is the start of something far more demanding: contract management, a 25- to 30-year journey of performance oversight, change management, risk mitigation and stakeholder coordination. “PPP contracts are imperfect,” said the Senior Adviser at the European Investment Bank. “You can’t anticipate everything that will happen over a generation. But if your contract is vague, you’ll end up making it up as you go along – and that’s a dangerous place to be.”
Contract management isn't passive
Farquharson emphasised that PPPs don’t run on autopilot. Government remains accountable for service delivery, even if a private partner operates the asset. “When something goes wrong, the media doesn’t call the private partner. They call the Minister,” he noted. He drew a sharp contrast between routine management – monthly reporting, performance-based payments – and exceptional events like bankruptcy, force majeure or refinancing. “Most contract managers aren’t trained to handle exceptional events. That’s when you call the specialists,” he said.
Measure less but measure well
Among the most complex aspects of PPP management are the payment mechanisms, particularly the key performance indicators (KPIs). Farquharson cautioned against the tendency to over-engineer contracts with excessive metrics. “There’s a temptation to measure everything but that becomes unmanageable. The principle is simple: measure less but measure well.”
A clear, focused set of KPIs aligned to service outcomes is far more effective than a bloated contract that invites disputes and inefficiency. “Focus on what really matters. You’ll get better results and an easier life,” he urged.
Mindset shift
Traditional procurement relies on inputs; PPPs rely on outputs. That shift can be uncomfortable for public officials. Farquharson acknowledged the instinct to micromanage but warned that it undermines risk transfer. “You don’t tell the private sector how to do it. You ensure that they do what they agreed to deliver. That requires discipline – and a little faith,” he noted.
Rigour, flexibility and record-keeping
Contract managers walk a tightrope. Too much rigidity can damage the partnership; too much leniency leads to erosion of standards. Farquharson’s advice: hold formal meetings, keep written records, escalate disagreements appropriately and document everything. He urged authorities to create multi-level engagement structures, allowing operational teams to solve day-to-day issues, while escalating legal or commercial disputes before they spiral into litigation. “Avoid arbitration if you can. It’s expensive, adversarial, and rarely leaves anyone happy,” he noted.
The tools that matter
Farquharson laid out a basic toolkit for contract managers, including a contract management manual, tailored to the specific PPP, a live financial model, enabling swift scenario analysis, a risk register, showing clearly what risks are retained and transferred, user satisfaction surveys to monitor whether citizens receive the intended service, and internal KPIs for the contract management team itself – “basic accountability,” as he put it.
The forgotten phase
As PPPs mature in countries like the UK and France, handback is becoming a live issue. But Farquharson warned that many governments still leave this too late. “You must start planning five to seven years before the contract end. Assess the asset. Decide on retendering. Understand the staffing and legal implications. Don’t assume it will sort itself out,” he warned. A particular risk in the final years, he noted, is asset deterioration. Once lenders are repaid, equity holders may be tempted to cut maintenance. “At that stage, the contract is your only line of defence,” he said.
Start early, stay consistent
Farquharson closed with a series of blunt recommendations starting from appointing a contract management team before financial close. Then, ensure that long-term resources are in place – don’t offload this to junior staff. Be consistent, as the private sector requires predictability. “Don’t alternate between laxity and aggression,” he advised. And always, always document decisions, which become institutional memory when staff rotate out. “The prize isn’t just short-term compliance but long-term service quality,” he concluded.
Read more about PPPs in the online edition here.
