2.4.37 The payment mechanism should incentivise the PPP provider to deliver the service at the required standards. The payment mechanism should include penalties and/or incentives. The payments can be based on availability, performance and/or usage. Public agencies should ensure that the payment mechanism, including the deduction mechanism, is not too complex to administer. Trigger points for penalties should also be set such that the PPP provider has a reasonable chance to remedy a service failure. Otherwise, the provider might deem the payment stream as being too volatile and risky. Such perceived volatility and risk might in turn result in higher costs of capital when the provider seeks private financing, e.g. bank loans, for the project.