3.9 Section 3 of this guidance outlines the approach which should be adopted by Procuring Authorities during the implementation of the payment mechanism. This should include the development of a financial model which records the calibration of the payment mechanism and is shared between both parties.
3.10 On projects where this has been completed, the following steps should be confirmed during the pre-services commencement phase:
o Updating the payment mechanism calibration model for changes in the project since financial/commercial close. For example, if there have been changes to the design of the project facilities these will need to be updated to ensure that the weighted areas in the model reflect the built facility.
o Details of the unitary charge will need to be updated for example, to reflect the actual indexation applicable and any changes relating to staff transfers.
3.11 There should also be a period of shadow running or at a minimum testing of the payment mechanism model to ensure that all parties have a common understanding of how it will work in practice. This will be particularly important where there have been significant changes in personnel since the procurement and negotiation phase.
3.12 This should include testing of the payment mechanism for a range of service failure scenarios. The following should be covered during this period to ensure that the payment mechanism provisions within the contract are fully understood:
o Specific calculation of deductions
o Specific calculation of any multipliers or repeat failure deductions
o Common agreement on how rectification periods are calculated and when deductions are applicable
o The format of the performance reporting
o How any help desk facility will be used for reporting faults and recording events/rectifications.
3.13 It is important that the Procuring Authority understands when formal notices require to be issued to a Contractor and in what format. Within the payment mechanism, this may relate to instances such as "Unavailable but Used" - in this case a protocol should be developed to ensure that the helpdesk inform the Procuring Authority that a space is unavailable so that, when applicable, the Procuring Authority can serve a notice that this space is Unavailable but Used. Research indicated that the deductions could be difficult to implement especially where users, who are aware that a space is being used, do not inform the individual within the Procuring Authority who is responsible for issuing notices.
3.14 The Procuring Authority should confirm with the Contractor their understanding of how the Helpdesk will operate and the performance reports originating from there. Both parties should ensure that they understand how performance failures are recorded; how their progress is monitored and approved and how performance failure episodes are closed out on the helpdesk record - for example, confirming that a performance or availability failure cannot be closed off when the helpdesk refer it to a specialist sub-contractor.
3.15 From the perspective of the payment mechanism, the Procuring Authority will need to consider who will be responsible for the following roles:
o who is responsible for overseeing the implementation of the payment mechanism? This will include reviewing and agreeing the reported deductions; and agreeing the level of backup to be provided for other adjustments being processed as part of the unitary charge for example, utilities costs.
o how will the Procuring Authority ensure that the performance report provided by the PPP Contractor accurately records all performance and availability failures, rectification times and resulting deductions? For example, in schools projects Business Managers at the Schools may be responsible for monitoring the performance of the Contractor at an individual school level. Other Councils have employed compliance officers.
3.16 During this period the PPP Contractor will be finalising the operational arrangements and both parties will require to work closely together.