Applied Methods and Techniques Flashcards

In an availability-payment PPP, the payment mechanism reduces the unitary charge when:

Answer: Assets are unavailable or service standards are not met

Availability payments are reduced through deductions for unavailability and poor performance, not for demand changes.

Which payment approach puts demand risk mainly on the private partner?

Answer: User-fee (toll) concession

In a user-pays concession, revenue rises or falls with usage, so the private partner carries demand risk.

A government uses a shadow toll on a highway PPP. Who pays the toll?

Answer: The government, based on traffic volumes

Under shadow tolls the government pays the private partner per vehicle using the road, so drivers pay nothing directly.

Key Performance Indicators (KPIs) in a PPP contract are best written as:

Answer: Measurable output standards tied to payment deductions

Good KPIs are measurable output-based standards linked to the payment mechanism to drive performance.

Why do PPP procuring authorities prefer output specifications over input specifications?

Answer: They let the private partner innovate in how it delivers the required service

Output specifications define what must be achieved and leave the method to the private partner, encouraging innovation and lifecycle optimization.

A ratchet mechanism in a PPP payment regime typically:

Answer: Increases deductions for repeated or persistent performance failures

Ratchets escalate deductions or warning points when failures repeat, giving the operator a stronger incentive to fix chronic problems.

Indexing part of a unitary charge to CPI mainly protects the private partner against:

Answer: Inflation risk on operating costs

Indexing payments to inflation lets the revenue track cost increases for operations and maintenance.