Analysis of Usage-Based Payments for Contractors' Compensation in PPP Projects

Usage-based payments have been used as a common compensation method for several public-private partnership (PPP) delivery systems. The main reasons for using the usage-based payments include transferring the project demand risk to the PPP contractor, affecting/improving the demand volume for a project, and assuring that the costs associated with the future unexpected increases in demand would be the responsibility of the contractor. The share the usage payments take in a payment mechanism may vary depending on the selected PPP system, the allocation of the project demand risk, and the government objectives in the project. This article briefly reviews the structure of the usage-based payments, reasons for using them, risk allocation associated with their use, and the validity of the assumption for using them under various PPP systems. The analysis is based on the characteristics of usage-based payments experienced in a number of transportation PPP projects in British Columbia (BC), Canada. Based on the analysis, the objectives from using the usage payments could be achieved through other means in the payment mechanism of the project, e.g. through using expanded performance-based payments and using strong non-availability and non-performance payment deductions. For the performance-based PPP systems and in order to better match and achieve the objectives of the government, it is suggested that the usage payment be used as a “bonus” incentive payment rather than a main or “core” payment.

Language

  • English

Media Info

  • Media Type: CD-ROM
  • Features: Figures; References; Tables;
  • Pagination: 15p
  • Monograph Title: TRB 86th Annual Meeting Compendium of Papers CD-ROM

Subject/Index Terms

Filing Info

  • Accession Number: 01045988
  • Record Type: Publication
  • Report/Paper Numbers: 07-2572
  • Files: TRIS, TRB
  • Created Date: Feb 8 2007 7:16PM