Under both government- and user-pays PPPs, bonuses and penalties can be tied to particular outcomes. Under government-pays contracts, bonuses and penalties are typically implemented adjustments to regular payments. Governments may also provide bonuses or charge penalties under user-pays contracts.
Iossa et al [#159, pages 46-47] provide an overview of performance-based payments. The Scottish Government note on designing payment mechanisms for PPPs [#258, pages 9-13] emphasizes the need to 'calibrate' the payment mechanism-that is, to check the financial impact of penalties under different possible combinations of under-performance. The model contracts in Table 3.1: Examples of Standardized PPP Contracts and Contract Clauses provide further examples of the use of bonuses or penalties. For example, the United Kingdom's standardized PPP contracts include a chapter on payment mechanisms [#234, chapter 7], which also describes calibration of penalties and bonuses based on financial analysis.