Dealing with Contract Variations in PPPs

Abstract

Variations are inevitable in public-private partnerships (PPP), due to the extensive duration of these contracts and the dynamic environment in which PPPs are usually implemented. Changes may lead to variations in the contract and consequently adverse reactions by partners. For the social and financial viability of the project, it is important to have mechanisms that can actively deal with variations that occur during the project life cycle. However, formal contracts with standardized project procedures do not always offer effective ways to cope with potential project dynamism. This paper presents the results of an in-depth case study into the modus operandi of a large-scale PPP infrastructure project with regard to variations in the realization phase. It was found that variations in infrastructure projects could not be dealt with solely through the formal contract rules, but that additional social mechanisms between the public commissioners and contracted companies were needed. Changes and contractual mechanisms are extensively discussed in project management literature. Also, the use of social mechanisms - complementary to the formal contract rules - is stressed. However, the literature offers little evidence about how these dealing mechanisms work in practice. This study reflects a real-life practice in responding to variations in a PPP and presents different ways in which various mechanisms, such as contract provisions, human relationships, organizational structure, digital tools, professional knowledge, and actor competences are interactively employed by project managers to deal with variation. General conclusions are drawn about the mechanisms observed, which may be applicable in the coordination of future interaction in public and private collaborations.