H.7.3  Performance reporting and monitoring

PPP projects, by their nature, experience high levels of change. In a well‑managed PPP project, the government party can sensibly control this dynamic situation because it has access to adequate information on which to base control actions. This information is received through effective monitoring of the state of health of the project as an integral part of the government party's overall contract management strategy.

In the absence of an effective performance monitoring and reporting strategy, the government party is unlikely to have an adequate understanding of the private party's business and will not receive early warnings of risks to the project outcomes. An effective performance monitoring and reporting strategy is built upon the following elements:

•  The government party understands the business environment and the objectives of government in entering into the contract in the first place. Performance measures lie at the heart of performance management and it is important that performance measures are linked to strategic objectives or to desired outcomes.

•  The government party understands the private party's internal operating environment, such as its cash flows. It is through this understanding that the government party can derive an awareness of the private party's strengths and weaknesses, including financial performance.

•  The government party monitors soft indicators of the management quality of the private party, looking for weaknesses or trends that may provide an early indication of trouble.

•  The government party regularly measures the quality of service against the KPIs and output specifications.

•  Having assessed the data collected through these monitoring activities, the government party takes appropriate action to mitigate or control any risks that are materialising, and to maximise value for money from the project.