Due to the identified limitations of the KPI regime contained in the SDA, and the consequential impact on SCSA's ability to effectively monitor and assess the concessionaire's performance, there have been some disagreements between the SCSA and the concessionaire as to whether underperformance has occurred and whether an abatement is warranted.
In the first year of operation by the concessionaire, the SCSA has assessed underperformance on 3 out of 4 quarterly reports; however, an abatement was only applied once (in the first quarter).
Correspondence between the SCSA and the concessionaire highlighted robust discussion between the parties at the time of the QPR assessments, particularly where underperformance has been found.
The SCSA has been able to use these commercial tensions to negotiate a range of specific commitments and formal plans from the concessionaire to address performance lapses in exchange for the withholding of abatements.
The SCSA views the resolving of any transitional and other operational issues, and the maintenance of a positive ongoing working relationship with the concessionaire and resolving any transitional and other operational issues as preferable to applying abatements which potentially harm the relationship, and prevent long-term solutions.
In SCSA's view, at this stage of the operations period the financial implications of not applying abatement are small compared with the benefit of maintaining a good relationship with the concessionaire in order to resolve issues as they arise.
Although the SCSA has enforced an abatement on one occasion under the SDA, it is also trying to establish good working relationships with the concessionaire and other key stakeholders.
During the period April to June 2007, the SCSA has refrained from applying other possible abatements in exchange for a commitment to performance monitoring system improvements. These abatements are able to be applied retrospectively if the concessionaire fails to achieve the agreed improvements.
Agreement was reached in August 2007 on a protocol to manage the relationship and achieve desired results for both parties. The agreement states that withheld abatements can be retrospectively applied if expected service standards are not met in future operation periods.
A breakdown in the relationship with the concessionaire is rated as the third highest strategic risk for the SCSA. Therefore, deferring the application of an abatement in exchange for a commitment to improve aspects of the KPI monitoring and reporting framework is considered an appropriate response.