Output specifications and payment mechanism SESSION 5 – Wednesday 9.00 – 10.30 Output specifications and payment mechanism

Developing the Output Specification What is an Output Specification? It is what the client needs to achieve from the facilities and services to be provided It helps the bidders to reply properly to the Invitation to Tender It details what needs to be achieved, not how it is to be achieved

Developing the Output Specification The following examples illustrate the differences between the two “Classrooms must have an adequate power supply to meet operational requirements” is an output: “Ensure that bedrooms have at least two pairs of 112V power supply socket outlets available on each wall” is not an output. “Ensure that there are adequate arrangements in place to maintain the safety of the school and its users ” is an output: “The school should have a 24-hour security patrol” is not an output. “Ensure that the school is clean enough when in use to provide a safe, hygienic environment and a positive image” is an output: “Internal cleaning of the school every morning and evening” is not an output.

Developing the Output Specification Why an Output Specification? Needed for a robust contract and the successful delivery of long-term services The emphasis is on service outcomes and outputs explicit allocation of risks and the integration of design and build with the operation of service facilities It focuses on strategic needs rather than the detail of current provision It should allow new ideas about the design, construction and operation of facilities to be proposed It focuses bidders’ attention on project risks This should lead to better designed and operated facilities in the longer term

Developing the Output Specification The range of high-level outputs required in a PPP property project will typically cover some or all of the following The provision of serviced accommodation. Alterations to existing buildings. Provision of grounds, car park or other external facilities. Building, installations and asset maintenance. Grounds maintenance. Cleaning and waste management. Furniture and equipment. Energy management. Caretaking/site supervisory services. Security and safety. Catering. Information technology.

Developing the Output Specification A sufficient range and level of services has to be included in order to: optimise the whole-life VFM benefits of integrating design with operational solutions sustain the level of competition for as long as possible

Developing the Output Specification A good Output Specification must: Reflect the actual requirements of users Be clear, concise and unambiguous Give the potential bidders sufficient information to decide and cost the facilities and services Comply with legal or other statutory requirements and policies, and compatibility requirements

Developing the Output Specification A good Output Specification must also: Specify any constraints which are essential to defining a deliverable project Allow projects to be evaluated in the procurement process against defined criteria Identify those service areas which are critical to the availability and performance of the facility Only contain requirements that can be afforded by the client and are deliverable

Developing the Output Specification The Output Specification, by defining outputs, defines many of the risks that the bidders are being asked to take on. It is for the bidders to assemble the optimum means of delivering the results required, and they do this at their own risk of failure. If the facilities or services fail in some way, the client cannot be blamed

Developing the Output Specification The Output Specification clearly defines the quality standards of facility provision and services to be achieved. Otherwise the Output Specification will be open to misinterpretation Also it will be harder to build up the public sector comparator (PSC) properly The PSC must be constructed on the same basis as the Output Specification.

Developing the Output Specification The following questions provide a useful framework for determining and defining outputs: What are the objectives of the facility and services to be provided? How can these objectives contribute to the successful delivery of the public service? In the light of these objectives, what is definitely not wanted What is negotiable? What is the level and standard of facilities and service that must be delivered? What is desirable over that level and standard, if affordable?

Developing the Output Specification Further questions are: What service parameters cannot be changed? How do services and outputs rank in terms of importance? What is likely to change over the life of the contract? How can such changes be allowed for in the specification, where necessary? Is it possible to translate the specified standards into performance measures within the payment mechanism?

Performance measurement SESSION 7 Performance measurement

Performance measurement system Concentrate on important measures Private sector partner to undertake monitoring Partner to provide a point of contact (helpdesk) Public sector Client and nominated users able to report faults Partner has permitted rectification period Failure may lead to reduction in payment

Performance measurement system Concentrate on important measures If too complicated, the mechanism becomes unwieldy and expensive The idea is to use the system to incentivise the partner, not penalise him

Performance measurement system Partner to undertake monitoring Partner should provide monitoring equipment Client can audit system If not working properly, payment deductions can be made

Performance measurement system Partner to provide helpdesk May be on or off-site Should be manned as often as necessary to be able to correct faults

Performance measurement system Client and nominated users able to report faults Important to control fault reporting to nominated users As soon as report is made, the rectification period starts

Performance measurement system Partner has permitted rectification period Important to allow partner to put right faults before deducting money Different periods for different categories of fault Temporary rectification might be possible Repeated faults rectified in time might however lead to payment deduction

Performance measurement system Failure to rectify in time may lead to reduction in payment Deduction points are given for failure to rectify in time Repeated failure results in escalating numbers of points Points can be awarded for non-availability and poor performance, but not for the same incident

SESSION 8 The Payment Mechanism

Payment Mechanism Net Basic Monthly Payment Equals Gross Basic Monthly Payments Minus Total Unavailability Monthly Deduction Minus Service Performance Monthly Deduction Plus Other adjustments Plus Indexation

Payment Mechanism Unavailability Deduction Notice of Unavailability Helpdesk or Partner’s on site representative Details of Unavailability Timing eg:- 5 minutes Logged Failure Time/Logged Rectification time Response to Notice

Payment Mechanism Commencement/Duration of Unavailability Health and Safety Rectification Temporary Rectification Permanent Rectification Inspection of Areas

Payment Mechanism Totally Unavailability Deductions Unavailability But Used Deductions eg:- Area Failure Deductions x Deduction Period x [%]

Payment Mechanism No Unavailability Deductions if:- Client Default Client Change Emergency Planned Maintenance Acts etc where the Partner has tried to minimise impact Client interference through instructions, requests etc Client Step In

Payment Mechanism Alternative Accommodation Partner’s Relocation Plan and Relocation Date Agreement of Alternative Accommodation Is there a safe and viable means of access? Sole discretion of Client Inside/Outside Project Boundary Alternative Accommodation takes over under the Payment Mechanism/Performance regime

Payment Mechanism Performance Deductions Notice of Performance Shortfall Helpdesk or on site representative Details of Service performance, shortfall and reasons Timing eg:- 5 minutes Logged Failure Time/Logged Rectification Time Response to Notice Limitations on Service Performance Deductions

Payment Mechanism Various Schedules Basic Payment Schedules Availability Criteria/Criticality Interim areas Full areas

Payment Mechanism Rectification Periods Services Priority Spreadsheets Service Rectification Periods Core Session tables Utilities Consequential Unavailability Customer Satisfaction Surveys