C. Allow adequate time for the parties to become familiar with the operational Key Performance Indicators and payment mechanisms

Key Performance Indicators (KPIs) either contain detailed descriptions or leave room for interpretation. Therefore, a ramp-up period can be helpful to allow parties to understand the intent of the project's KPIs and a test performance evaluation can start before official commencement of the operations phase.

The practical implementation and verification of operational KPIs, and the associated definition of performance failures and payment deductions, is a challenge at the beginning of the operations phase. The definition of performance failure can be a source of tension, given its importance to the revenue of the Project Company. This is particularly relevant if the contract drafting is not clear in terms of recording performance levels and applying payment deductions.

During this period the Procuring Authority should make sure that the Project Company's quality management and management information system, performance monitoring procedures, overall reporting mechanism, and audit trail supporting the Project Company's assessment of performance, are robust and tie in with the Procuring Authority's governance and payment processes.

The administrative staff of the Procuring Authority may not have experience in making large payments during the operations phase (particularly if they are more familiar with traditionally procured projects where there won't be a large debt service component to the payments during operations). The Procuring Authority should ensure that staff are knowledgeable on internal procedures and payment mechanisms well before the deadline for the first payment becomes due.

Guidance on KPIs and payment mechanisms is detailed in Section 3.2 (Performance monitoring).