For each of the shortlisted options, the PPP Project Team must outline the resultant payment mechanism, which details how payments will be made by the relevant Government Entity to the project company or the Preferred Bidder. The mechanism must detail the structure of the payment, milestones upon which they are delivered, any related penalties and incentives and how that regime is structured, and the relation of the nature of the payment to performance indicators or other contractual issues that will be governed by the structure of the option. Types of payment mechanisms that the PPP Project Team must consider, and align with relevant options, include: availability payment, revenue guarantees, viability funding, and operating subsidies, amongst others. Additionally, the form of the payment must also be clearly stated -viz., whether it will operate as a toll, a tariff, or a user fee, for example.
The shortlisted options, along with the relevant payment mechanism structures, will be imperative to informing the risk assessment and the financial model; for each option, as detailed below, risk will be separately quantified and allocated, with the payment mechanism determining the demand Risk Allocation.