Payment Mechanism Modelling & Benchmarking

Payment Mechanisms can be based on condition, performance and usage requirements of a an entire system or network of assets down to groups or individual assets, depending on the service being provided by the assets. There can also be a number of mechanisms that can work independently or even operate in conjunction with each other, the later being a more complicated situation.

The data used to calculate the performance or condition also may or may not be readily available, depending on a number of factors, including: (1) do the assets have a history of usage; (2) has the client collected comparable performance and condition data that can be used in the Payment Mechanism calculations, and; (3) how subjective is the data.

Expert Exposure

At apm, we have been exposed to various types of performance- and condition-based payment mechamisms on both Rail and Highways Public Private Partnership and Private Finance Initiative projects.

As part of the Tube Lines tender and operational stages, we developed a condition- and performance-based software system to model 5 performance-penalty mechamisms feeding into a single Payment Mechamism. The model was used to many activities, including the following:

• Model Condition and Performance over a 30 years period
• Calculate the cost of risk due to data uncertainty
• Support the agreement on acceptible condition and performance benchmarks, which formed the Payment Mechanism part of the Public Private Partnership contract
• Provide input to the tender cost
• Re-assess Condition and Performance Benchmarks on a yearly basis
• Assess the impact of new data as it became available on a monthly basis
• Assess the impact of upgrades to infrastructure or services operation, e.g. increasing train services at peak times, or adding additional carriages to trains
• Calculate the revenues lost via infrastructure closes, e.g. closure of parts of the Piccadilly line during the Heathrow Terminal 5 works