3.1.20 To ensure that the output- or outcome-based specifications work, they should be measurable. Performance measurement is critical to PPP contracts because they form the basis of the payments to the PPP provider. Performance measurement will be linked to an agreed set of standards or key performance indicators, which generally relate to the quality, amount and frequency of service provision.
3.1.21 The sharing of responsibilities and risks comes into effect through the performance-based payment mechanism, which has the following key elements:
a) Payments commence only upon the provision of services by the private sector (to incentivise timely completion of the building construction);
b) The PPP provider earns payments only to the extent that it provides services which meet the service requirements as set out in the contract.
3.1.22 Typical methods of performance-related payment are based on usage or availability. Please see section 2.4 for guidelines on the PPP payment mechanism.