PPP Performance Through Payment Mechanisms

The use of Public Private Partnerships (PPPs) to deliver new public infrastructure and improve the quality of service delivery is increasing internationally. As many hundreds of PPP projects enter the operational phase, it is clear that the value that they create is maximised when public-private relations are underpinned by a properly designed contract management framework, which outlines the service outputs that the authority requires, the methods for measuring and monitoring performance, and the regime under which the payment due to the private partner is determined.

It is the contract management framework that puts into effect the transfer of risk and responsibility between the authority and the private sector, creating the incentives for the service providers to deliver facilities and services on time and within budget – and to deliver public services at the level of performance and quality that the client requires for the full length of the contractual period.

This white paper outlines the importance of a well-constructed payment mechanism for PPP contracts. It provides all parties with a framework for designing effective payment mechanisms and outlines the importance of underpinning this with an automated performance management system.