III. PAYMENT MECHANISM

Yes/No

Comments

15. Are the required service standards based on output specifications?

16. Are all these service standards easily monitorable and verifiable?

17. If not, are other objective measures of performance specified?

18. Are customer satisfaction surveys used to monitor performance of the private-sector party?

19. If yes, are customer satisfaction surveys carried out by an independent third party?

20. Does the contract exhibit a consistent link between output specifications, risk allocation and incentives, and the payment mechanism?

21. Is the payment mechanism consistent with the allocation of risks between the public and private parties, and hence with the incentives given to the private-sector party?

22. Is the payment due to the private-sector party conditional on service provision?

23. Does the contract specify a service commencement day after which the first payment is made?

24. Does the public-sector party impose sufficient contractual protections from delays in service commencement, like robust deductions and liquidated damages?

25. If the payment mechanism is based on user charges, does the tariff level ensure the bankability of the project?

26. Does the level of tariff discourage demand, particularity if there is an alternative free-available service?

27. Are there provisions to combine user charges with any form of subvention from the public-sector party?

28. Do these subventions depend on the private-sector performance, like subventions based on the number of users?

29. Is the private-sector party allowed to collect secondary revenues, like advertisement, food services, etc.?

30. If the revenues collected by the private-sector party turn out to be higher than expected, are there mechanisms to limit the private sector profits, like sharing surplus revenues?

31. If the payment mechanism is based on usage, is the definition of service usage measurable and observable, like traffic volumes?

32. Is the usage payment capped for high levels of usage?

33. Does the payment mechanism include bonuses or deductions according to availability of the service and/or performance targets?

34. Do deductions vary according to the severity of the availability/performance failure?

35. Does the contract include clear rectification periods providing the private-sector party with clear deadlines within which to rectify the failures to avoid additional and increasing deductions?

36. Do deduction payments use a ratchet mechanism where deductions increase with the duration and frequency of the failure?