MILA SULLIVANPROCUREMENT CONSULTANT
INTERNATIONAL CONFERENCE ON
PUBLIC PRIVATE PARTNERSHIPS AND
PUBLIC PROCUREMENT
2017
BLED, SLOVENIA
FINE TUNING OF OBJECTIVES & RISKS
SIGNIFICANT Risks (macro)
Political, Financial, etc.
PROJECT Risks
Planning, design, risks, etc.
ORGANISATIONAL Risk
Technology, organisational risks, etc.
RISK & MANAGEMENT
RISK MANAGEMENT process of identifying
significant risks to the project; devising tactics to
reduce exposure; monitoring effectiveness of
actions and risk management
RISK any factor, event or influence that threatens
the successful completion of a project in terms of
cost, time or quality
What needs to happen is: Listing risks by
significance, then quantity/qualify and include
change management process to reflect actual risk
status of the project
Report and include in corporate risk register
two way consideration
PPP is based on the premise on allocating risks to those best able to manage them…
corporate-project project – corporate
RISK & PPP OBJECTIVES
Provide a more consistent
and predictable profile of
Contracting Authority
expenditure on a project, by
converting variable capital
and operating costs into
more consistent and
predictable unitary
payments
Reduce the long
term cost of a
project by allocating
risk to the party that
is able to manage it
in the most cost
effective way
Reiterative process
with identified risk
revision millstones
and multi-
disciplinary team
exercise
Provide an incentive
to the Contractor to
deliver a project on
time, to the required
standard and within
budget
Improve the quality
of customer service
and increase
revenue through
better management
of risk
The primary objectives of transferring risk from a Contracting Authority to a private sector contractor are:
PURPOSE OF ASSESSING RISK IN PPP
TO INFORM THE MOST
APPROPRIATE COMMERCIAL
STRUCTURE AND FORM OF PPP
CONTRACT
TO INFORM DEVELOPMENT OF
CONTRACT DOCUMENTATION
TO FACILITATE CONTRACT
NEGOTIATIONS AND
STRATEGIZE TACTICS
Why is this important
Numerous surveys had shown top reasons for engaging/marrying a PSB as:
REPUTATION OF THE
ORGANISATION
GOVERNMENT SUPPORT
AND COMMITMENT
TO DELIVERY
EFFECIVE CONTRACT
MANAGEMENT & RISK
ACCOUNTING
x
?
?
?
?
Single forecast
precise enough to
determine strategy
Analytical Tools:
“Traditional”
Strategy Tool Kit
Few discrete
outcomes that define
the future
Analytical Tools:
- Decision Analysis
- Option Valuation
Models
1
2
3
Range of outcomes but
no natural scenarios
Analytical Tools:
- Latent Demand
Research
- Technology
Forecasting
Scenario Planning
No basis for forecast for
the future
Analytical Tools:
- Pattern Recognition
- Nonlinear dynamic
models
RISK REQUIRES STRATEGY
PROJECT RISK MANAGEMENT PROCESS
RISK
REGISTER
14
3 2Trend reports, exception reports, review
meetings
1
4
3
2
IDENTIFYRisk to project objectives and
oppurunities
EVALUATERisk impact and the probability
of occurrence
CONROLPrioritize and develop
mitigation plans and actions
REVIEWRisk to support project
management decisions and
record changes
Meetings, workshops, risk lists
Quatitative and Qualitative risk Analysis
(QCRA QSRA)
Mitigation plans – define strategy, action
lists, owners, deadlines and progress
RISK MANAGEMENT POLICY - Corporate
RISK MANAGEMENT PROCEDURE
RISK MANAGEMENT PLAN
PROJECT BUSINESS CASE – ProcurmentStrategy, Risk allocation Matrix, Project
objectives
OUTPUT
PROJECT RISK REGISTER
MONTHLY PM REPORT
QUARTERLY RISK REPORT
RESIDUAL RISK REGISTAR
ISSUE REGISTER for risks that have
occurred
INPUT
RISK = FORESIGHT
KP KA VP CR CS
KR CH
CS RS
SOCIETAL AND CULTURAL TRENDS
SOCIOECONOMIC TRENDS
REGULATORY TRENDS
TEHNOLOGY TRENDS
MARKET SEGMENTS
NEEDS AND DEMANDS
MARKET ISSUES
SWITCHING COSTS
REVENUE ATTRACTIVENESS
SUPPLIERS AND OTHER VALUE CHAIN
ACTORS
STAKEHOLDERS
COMPETITORS (INCUMBENTS)
NEW ENTRANCE (INSURGENTS)
SUBSITUTE PRODUCTS AND SERVICES
INDUSTRY
FORCES
MACRO-
ECONOMIC
FORCES
ECONOMIC INFRASTRUCTURE
COMMODITIES AND OTHER RESOURCES
CAPITAL MARKETS
GLOBAL MARKET CONDITIONS
MARKET
FORCES
KEY FORCES
RISK ASSESSMENT
1
3
4
5
6
7
8
9
2
Consideration of
correlations and
interfaces between
particular risks
Identification of
risks inherent in
the project
Understanding
of the likelihood
of their
occurrence
Identification
of typical
causes of risks
Quantification
of impacts if
the risk occurs
Quantification
of the cost to
mitigate the risk
Consideration of
the level of
management
control over risks
Assessment of the
priority in which
the risks should be
mitigated
Identification and
quantification of
the opportunities
INVOLVES:
PPP RISK MANAGEMENT OVERVIEW
Operational Staff
responsible for
managing existing
operations
Contract Authority
Management TeamLegal and Financial
advisors
Quantity Surveyors/
Project Accountants
Embedded in the
Invitation to Negotiate
and issued to short listed
bidders
Risks may be adjusted
and amendments to the
ITN documents issued.
The quantification of risk
is updated and included
when the final PSB is
produced.
Significant risks that have
a direct impact on the
overall cost of the project.
The risk matrix and PSB
may be updated to
reflect the outcomes of
the negotiations
A project risk
management plans should
also be updated at this
stage and included in the
report on the Tendering
Process
NEGOTIATE SIGNIFICANT
RISKS
ITN RISK MATRIX CONSIDERATION OF VIEWS
OF BIDDERS
FINALISE RISK MATRIX AND
PSB
EVALUATE RISK
MANAGEMENT PROPOSALS
PRELIMINARY RISK ALLOCATION MATRIX
LESSONS LEARNED
Project manager should always assess the overall organisational ‘appetite for risk’
Always understand your negotiating power or willingness to negotiate
Always check the level of design with the expected level of risk, as sometimes project design
progresses, and risks are not timely updated
Risk manager’s attitude to risk and risk interpretation is a risk it itself
If risk allocation does not naturally allow for ‘off balance sheet’ treatment of project, than you
are probably be paying to much via PPP
Allocate energy, time and effort, commensurate with the project value and complexity
ON THE LIGHTER SIDE….