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

2. 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

3. 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.

4. 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

5. 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.

6. 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

7. 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

8. 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

9. 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

10. 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.

11. 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?

12. 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?

13. Performance measurement
SESSION 7
Performance measurement

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. SESSION 8
The Payment Mechanism

22. 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

23. 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

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

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

26. 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

27. 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

28. 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

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

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