The Payment Mechanism is an integral part of the Contract and provides the contractual basis for the remuneration of the Contractor in exchange for delivering outputs specified in the Contract. The Payment Mechanism is necessarily linked to other parts of the Contract, such as the Output Specification which sets the Performance Standards and certain contractual remedies in the Contract, such as termination triggers. It is essential to ensure that these three aspects of the Contract are consistent with each other.
This guidance provides a set of principles applicable to payment mechanisms for all residual waste processing technologies. Where technology specific issues arise these are identified as such in the guidance.
This guidance is primarily focussed on Residual Waste Treatment Projects (RWTPs), which include disposal of process outputs but may, with appropriate development, also be applied to integrated waste management projects.
This guidance assumes that once the Contractor accepts Contract Waste it is responsible for all processing right through to final disposal or sale, as the case may be, of process outputs. The guidance does not address issues arising from alternative structures where the Authority takes back legal responsibility for any fraction of the waste stream after partial processing by the Contractor e.g. a Refuse Derived Fuel (RDF). Such structures could involve significant additional risk for the Authority and any Authority considering such a structure is advised to consult with the Waste Infrastructure Delivery Programme (WIDP) at the earliest opportunity.
The principles set out in this guidance and as articulated in the suggested drafting set out in Part II of this module are intended to provide a strong basis for the development of project specific payment mechanisms. The development work required for the production of a project specific payment mechanism will be resource intensive and will require input from experienced advisers as well as local knowledge. The factors which will determine the extent and the nature of the additional development required will include the technology proposed for the project, the definition of Contract Waste (e.g. whether recyclables are included in the project) and the proposed commercial arrangements (e.g. the risk sharing on Third Party Income).