In this model, the NOPs will be required to pay a one-off 'penalty' where they fail to achieve MCOS for a particular non-cost KRA (e.g. a date critical to the Owner, or safety and health requirements).

Similarly, this model can be structured to reward the NOPs with a 'bonus 'in lieu of a 'penalty', where they achieve exceptional performance (if required).

Such bonus or reward payments still require the Owner to exercise some caution. For example, in seeking to achieve the Owner's target date and avoid paying the penalty, the NOPs may be incentivised to incur significant acceleration costs. There is also the risk that this approach may drive unforeseen adverse behaviours if the critical date is missed by only a small amount of time.

However, bonus payments may be appropriate for other non-cost KRAs, where the Owner requires exceptional performance to be achieved.

Refer to 'Alternative 2' in the Risk or Reward Regime set out in the Model PAA.