Payment mechanisms

49  The payment mechanism is the primary vehicle for ensuring that the PFI provider performs to the standards set out in the output specification and therefore for achieving good VFM. The mechanism is based on a complex formula that links payment levels to a range of availability and performance criteria that have to be met in full, otherwise deductions are made. PFI payment mechanisms represent a significant change to the way FM services are monitored in terms of their sophistication and complexity. Given the novelty of these arrangements, it is not surprising that there has been a mixed picture during their implementation and few deductions in the early years of most school schemes. One commendable reason for few deductions could be that the strong financial incentives for PFI providers to avoid them means that services have been provided to the output specification. However, the payment mechanism was not enforced rigorously in some instances, for example, because teething problems with the provider's information system meant that the LEA had no information base for deductions. There also needs to be further work to ensure that payment deductions are a proper reflection of the impact of the non-delivery of a service and not just a pro rata apportionment. For example, a deduction of £268.82 was made out of a monthly payment of about £150,000, for two days' non-availability of an athletics field. This sum may not be high enough to act as an effective incentive, and probably cost more to calculate and administer than the value of the deduction. The true 'cost' to the school in terms of disruption and cancelled lessons may have been substantial.I A standard payment mechanism will be introduced as part of a school procurement pack being produced by 4ps - this should provide an opportunity to improve the operation of the payment mechanism.