The incentives for performance stem primarily from the payment mechanism, which is designed to:
■ ensure that payment is made only to the extent that the service meets the desired standard; no payment is made until a school is built and operating
■ provide incentives for the contractor to meet the standards by placing payments to the contractor at risk for failure to meet those standards
■ provide incentives for the contractor to correct any failures as rapidly as possible and to avoid repeated failures by the use of defined rectification periods and the escalation of charges.
The starting bases for calculating each month's 'monthly net fee' are 'monthly service fees' for each school, which are payable if the contractor fully complies with all of DET's specifications and other requirements for the operational services.
These fees are adjusted each quarter in line with CPI less an 'efficiency' reduction. These fees will also be adjusted up or down every five years to reflect the results of 'bench marking' and 'market testing' exercises.
Each of the contractor's monthly net fees may be reduced by:
■ any failure by the contractor of the school facilities to comply with availability standards set out in the contract
■ any other failures by the contractor to provide its operational services to standards set out in the contract
■ any repetition of an availability or performance failure leading to three or more occurrences in any three-month period
■ reporting failures.
By the end of 2005 payment deductions had amounted to around half a percent of the monthly service fee, most likely reflecting the newness of the facilities and good performance by the contractor.