The inclusion of concessions within PFI / PPP projects has led to a change in roles for the operating stage of projects. As part of the PFI contract, the contractor is granted exclusive rights to provide a service or to exploit an asset during what is known as the service operation stage of a project. During this stage a payment, which is governed by a tariff structure or payment mechanism (normally based on availability and performance criteria with some dependence on volume usage), is made to the private sector contractor. The payments reflect the level of benefits enjoyed by the public sector client. However, it is too early within these contracts to comment substantially on the service operation stage, in particular its flexibility to changes in service requirements.
The linking of tariff structures and payments streams reduces the costs to the public sector as benefits reduce. This very significantly reduces optimism bias at both business case and contract award stages.