It is important that appropriate consideration is given to the Payment Mechanism at an early stage in the development of a PFI project and that it is developed alongside the Output Specification. A working model of the mechanism should also be developed to assist in calibration. Detailed guidance on the calibration of the Payment Mechanism is provided in Section 7.5 of SoPC4.
The Authority should consider the Payment Mechanism at all key stages in the procurement process. The key stages are identified in the table below and addressed more fully in the remainder of this Section:
Stage | Action |
Complete risk allocation matrix and identify risks to be allocated through the Payment Mechanism. Determine base case waste flow forecasts. | |
Provide bidders with statement of Payment Mechanism principles and base case waste flow forecasts. Invite commentary on the principles. | |
Evaluate impact of any comments made by the bidders. Consider both the impact on the evaluation scores and the drafting to be completed at the next stage. | |
Provide bidders with draft Payment Mechanism Schedule to the Contract including proposed Minimum and Maximum Tonnages. Invite mark up of the draft Payment Mechanism Schedule. | |
Evaluate impact of the mark ups provided by the bidders. Consider both the impact on the evaluation scores and the need for any revisions to the drafting before the next stage. | |
Agree all commercial principles including Minimum and Maximum Tonnages with each bidder and insert agreed numbers in the draft Payment Mechanism Schedule to the Contract. | |
Provide each bidder with a Payment | |
| Mechanism Schedule to the Contract reflecting the commercial principles and numbers agreed in dialogue subject only to the final re-pricing to reflect interest rates prevailing at Financial Close. |
To the extent there are differences in the Payment Mechanism Schedules agreed with bidders these differences should be taken into account in evaluating bids. | |
Any updates to the Payment Mechanism Schedule should be restricted to clarifying aspects of the tender or confirming commitments. | |
Insert final numbers for Base Payment to reflect interest rates prevailing at Financial Close. |