Key Performance Indicators

Another method to reduce information asymmetry is to design a system of Performance Indicators which evidence the most relevant aspects of the business performance carried out. The Performance Indicators are, as their name indicates, indexes that allow a synthesis of some aspects of the business performance. Then, this performance can be analyzed by comparing these indicators with ideal ones102, which represent the ideal towards which the firms' performance should focus and also with the indicators of similar firms (regarding the market, the size, the performance period in charge of the service provision, etc.) to get a picture of its relative position (departure from ideal or optimal levels) and the possible reasons of it.

Table 8: Performance indicators to measure PPP performance

# Although contracts in Victoria do not typically include financial performance measures, the government does monitor the financial performance of a concessioner and its principal contractors (private parties must submit their financial documents to government).

Source: Philippe Burger - Public-private partnerships and transport infrastructure -- http://www.oecd.org/dataoecd/2/26/39761715.pdf

These indicators can also be used to define thresholds which would trigger some institutional actions. For example the electricity concessions in Buenos Aires establish that if fines for poor quality reach 20% of revenues in any given year the government has the right to terminate the concession. Less draconian measures would involve obligation to present a report or call for a specific committee to be assembled if the level of quality falls below a given level.

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102 KPI targets are often specified in terms of acceptable range of performance rather than single-point measures of performance.