2.4.12 Under the availability basis of payment, the public agency will pay the private provider an amount, $x, for each unit of service/facility that is made available, i.e. service at the specified performance standard is ready for use, up to an agreed quantity. Availability payment is made regardless of the extent to which the service/facility is actually used. The services that need to be made available may comprise physical places or units (such as courtrooms, hospital beds) or peak capacity levels (such as capacity of a water treatment plant).
2.4.13 The availability payment structure is typically used for PPP projects where:
a) The public agency is more concerned about having an available service/facility, instead of the actual us age of the facility/service. In other words, the public agency needs the facility to be available and ready to use, regardless of the extent to which it is actually used, e.g. military facilities/equipment, and the availability of a road.
b) The public agency decides to bear the responsibility of managing demand to meet planned usage levels, as the demand is more within the control of the public sector than the private sector. For example, e.g. in school PPP projects where students are assigned to each school by the public education authority, the public sector can better manage the usage of the school facilities. Hence, the responsibility of ensuring that actual usage levels meet the planned usage requirements will be borne by the public agency, by paying the private provider based on the availability of the school facilities, regardless of the actual student population.
2.4.14 Availability is defined not simply by the accommodation or capacity being made available but also by the accommodation or capacity being available at the specified quality standards. For example, a PPP courtroom is only available if it is clean, safe, has suitable air-conditioning and all electrical and mechanical systems are in working order.
2.4.15 The following questions should be considered when structuring availability-based payments:
a) When does availability/unavailability commence? When using the availability basis of payment, public agencies must define what is meant by 'available' or what is meant by 'unavailable'. The definition must also specify the conditions that must be met if the service is to be treated as available or unavailable.
b) Are there critical groups of facilities/services where unavailability will lead to higher penalties to the unitary payment? The financial consequences of unavailability of a group of units/ facilities should depend on its criticality level, as some areas will be more critical to the provision of the required service than others, e.g. the availability of classrooms is more critical than the availability of, say, common areas such as corridors. In which case, the deduction mechanism should ensure that the deductions for unavailability of critical areas are sufficient deterrent to ensure that the PPP provider will keep these areas available in the first instance. Really, what matters to the public agency is that the PPP facility is available in the first instance.
c) How long is the rectification period for the provider to rectify a problem without triggering the start of unavailability? If the facility/service falls below standards, the provider is typically given a 'remedy' period to resolve the problem. If the problem is left unresolved at the end of the remedy period, the service will be deemed to be unavailable and payment should be reduced accordingly. If the PPP provider fails to rectify the problem further after the first deduction has kicked in, the public agency may invoke a further deduction. This is to ensure that the problem is rectified as soon as possible so as not to unduly disrupt the delivery of public services. However, a balance should be struck as to how many more further deductions to be made, as this will only complicate the payment mechanism and thus the cost of the PPP contract.
d) How can the public agency deal with unavailable service/facility that is being used? There are some situations where the public agency might continue to use a service/facility, e.g. classroom, despite defects which would have rendered that part of the service unavailable. In such cases, the public agency can either (i) consider the service to be available especially when the continued use by the public agency prevents the provider from rectifying the problem, or (ii) make a smaller deduction to the unitary payment, instead of the full deduction if the service/facility is unavailable and unused.
e) What mechanism will be used to assess when availability has been restored following an episode of poor performance?
f) Will planned maintenance of the facility be considered as unavailability?