5.1 The payment mechanism is the mechanism by which Procuring Authorities ensure that they receive value for money from their PPP projects over the length of the contract. It is the vehicle by which availability and performance risk is transferred to the private sector.
5.2 At various points during a PPP project, the unitary charge will vary from the amounts included within the Financial Model agreed at Financial Close. This could be due to changes within the facilities and services to be provided or due to changes arising from indexation or benchmarking/market testing. It is important that any such changes are reflected in an adjustment to the unitary charge and that Procuring Authorities can make availability and performance deductions based on the increased value of the unitary charge. Separate operational guidance is available covering areas such as market testing and benchmarking.
5.3 Within this section, we provide an overview of some of the factors which may result in a change to the unitary charge. We would recommend that Procuring Authorities include in their guidance and contract manuals a summary of which events may result in changes to the unitary charge, which areas of the Project Agreement will cover these and at which times during the contract these may occur. The guidance manual should be reviewed in conjunction with the Procuring Authority's advisers to ensure that it reflects the actual contractual position for that project.
5.4 The points highlighted below will also be important in assisting a Procuring Authority to manage the affordability implications of a project by highlighting those times in the contract life when costs may increase.