Public Monopoly with Management Contract / Legal Aspects / Legal Instruments / Management Contract / General Contract Design

General Contract Design
The management contract
The main purpose of the management contract is to set down in writing the agreement reached between the public monopoly and the management company as to their respective rights and obligations. It should be the primary reference that regulates their business relationship.

The management contract should be complete, unambiguous, and able to be understood without recourse to extraneous material. Because the duration of the management contract may extend over a period of years, the contract should also make reasonable provision for events that may occur over the course of its life, including how to settle disputes that may arise between the parties.

The general principles pertaining to the proper drafting of commercial contracts, which should also guide the parties in the drafting of the management contract, can be found in specialized works on the subject.

The contents of the management contract
The core elements of a management contract are not difficult to outline, but the details may be complex.

In a management contract the role of a management company is limited.
This differs from a bus contract, where the bus operator provides the vehicles necessary to operate urban bus transport services, some, if not most, of the facilities associated with the services and the personnel to staff those vehicles and facilities.

A management contract is an arrangement where the owner of an existing enterprise entrusts the management and operational control of that enterprise to a management company for an agreed period of time, in return for compensation.

The terms and conditions of management contracts are specific to the country and enterprise to which they relate. In certain sectors — the hotel sector being the prime example — there are standard features and provisions that are used industry-wide. In urban bus transport, terms and conditions are more likely to be enterprise-specific, tailored to reflect both the current needs of the bus transport enterprise requiring management and the expectations of the public monopoly with regard to its desired future performance.

Notwithstanding the possible diversity in management contracts in urban bus transport, a number of features are common to all, including:

The relationship between the management company and the public monopoly and the role each party is to play.
The scope of the management company’s authority and control.
The obligations of the public monopoly.
The process by which monitoring and enforcement of the contract is to be accomplished.
Staffing and personnel issues.
Compensation
The liability of the parties.
Settlement of disputes.
Duration of the contract.
In some cases, training and the transfer of skills and technology.

How the exact terms and conditions of the management contract are arranged and presented can vary according to the individual needs of the situation, the applicable laws and customs in force in a given country or municipality, the existence of available precedents or simply the individual preference of the drafter.