MILA SULLIVAN PROCUREMENT CONSULTANT

Transcription

1 INTERNATIONAL CONFERENCE ON PUBLIC PRIVATE PARTNERSHIPS AND PUBLIC PROCUREMENT 2017 BLED, SLOVENIA MILA SULLIVAN PROCUREMENT CONSULTANT

2 FINE TUNING OF OBJECTIVES & RISKS SIGNIFICANT Risks (macro) Political, Financial, etc. PROJECT Risks Planning, design, risks, etc. ORGANISATIONAL Risk Technology, organisational risks, etc.

3 RISK & MANAGEMENT RISK any factor, event or influence that threatens the successful completion of a project in terms of cost, time or quality RISK MANAGEMENT process of identifying significant risks to the project; devising tactics to reduce exposure; monitoring effectiveness of actions and risk management PPP is based on the premise on allocating risks to those best able to manage them 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 corporate-project project corporate

4 RISK & PPP OBJECTIVES The primary objectives of transferring risk from a Contracting Authority to a private sector contractor are: 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 Provide an incentive to the Contractor to deliver a project on time, to the required standard and within budget 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 Improve the quality of customer service and increase revenue through better management of risk Reiterative process with identified risk revision millstones and multidisciplinary team exercise

5 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

6 RISK REQUIRES STRATEGY 3 Single forecast precise enough to determine strategy Analytical Tools: Traditional Strategy Tool Kit Range of outcomes but no natural scenarios Analytical Tools: - Latent Demand Research - Technology Forecasting Scenario Planning?? x? 1? 2 Few discrete outcomes that define the future Analytical Tools: - Decision Analysis - Option Valuation Models No basis for forecast for the future Analytical Tools: - Pattern Recognition - Nonlinear dynamic models

7 PROJECT RISK MANAGEMENT PROCESS 1 IDENTIFY Risk to project objectives and oppurunities Meetings, workshops, risk lists INPUT RISK MANAGEMENT POLICY - Corporate RISK MANAGEMENT PROCEDURE RISK MANAGEMENT PLAN PROJECT BUSINESS CASE Procurment Strategy, Risk allocation Matrix, Project objectives 2 EVALUATE Risk impact and the probability of occurrence Quatitative and Qualitative risk Analysis (QCRA QSRA) CONROL Prioritize and develop mitigation plans and actions Mitigation plans define strategy, action lists, owners, deadlines and progress RISK REGISTER 4 REVIEW Risk to support project management decisions and record changes Trend reports, exception reports, review meetings OUTPUT PROJECT RISK REGISTER 3 2 QUARTERLY RISK REPORT ISSUE REGISTER for risks that have occurred MONTHLY PM REPORT RESIDUAL RISK REGISTAR

8 RISK = FORESIGHT SOCIETAL AND CULTURAL TRENDS SOCIOECONOMIC TRENDS REGULATORY TRENDS TEHNOLOGY TRENDS KEY FORCES MARKET FORCES MARKET SEGMENTS NEEDS AND DEMANDS MARKET ISSUES SWITCHING COSTS REVENUE ATTRACTIVENESS KP KA VP CR CS KR CH CS RS 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

9 RISK ASSESSMENT INVOLVES: 1 Understanding of the likelihood of their occurrence Quantification of impacts if the risk occurs Assessment of the priority in which the risks should be mitigated Identification of risks inherent in the project Consideration of the level of management control over risks Identification of typical causes of risks Quantification of the cost to mitigate the risk Consideration of correlations and interfaces between particular risks Identification and quantification of the opportunities

10 PPP RISK MANAGEMENT OVERVIEW Contract Authority Management Team Operational Staff responsible for managing existing operations Quantity Surveyors/ Project Accountants Legal and Financial advisors ITN RISK MATRIX CONSIDERATION OF VIEWS OF BIDDERS FINALISE RISK MATRIX AND PSB NEGOTIATE SIGNIFICANT RISKS EVALUATE RISK MANAGEMENT PROPOSALS 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

11 PRELIMINARY RISK ALLOCATION MATRIX

12 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

13 ON THE LIGHTER SIDE.

14 THANK YOU