In infrastructure projects involving existing assets or utilities, the data provided prior to commencement of the contract is often inaccurate, resulting in inaccuracies in the assumptions for financial modeling and performance standards. This note considers the problem and provides sample wording for an initial benchmarking period at
the beginning of a contract.
A benchmarking period enables the operator to establish, with the participation of the awarding authority, the base case for performance and asset condition during a preliminary phase of the project. The disadvantages are that: -
- there is little certainty at the beginning of the contract for the awarding authority as to the costof the contract and the level of performance to be achieved and since the operator controls the assets it is hard for the authority to verify the data.
- it is hard to achieve transparency in procurement procedures as parameters and performance standards may need to be amended post-contract – this risk can be mitigated by ensuring that the data and performance standards are amended in line with the base data and performance standards set out in the schedules to the contract and only to the extent that the data is materially different from that assumed in the base data and performance standards.
- the awarding authority will also have less leverage in terms of competitive pressure over the operator on the actual service levels.
The alternative solution is for the base data to be established prior to contract commencement by consultants or other third party; however, it is often difficult to establish the performance parameters where day to day management is not being overseen as it is difficult to verify data such as billing through isolated verification.
THIS DOCUMENT HAS BEEN PREPARED FOR THE PURPOSES OF THE PPP IN INFRASTRUCTURE RESOURCE CENTER FOR CONTRACTS, LAWS AND REGULATIONS. IT IS A CHECKLIST FOR GENERAL GUIDANCE PURPOSES ONLY AND SHOULD NOT BE USED AS A SUBSTITUTE FOR SPECIFIC LEGAL ADVICE FOR A PROJECT.
PPP in Infrastructure Resource Center for Contracts, Laws and Regulations (PPPLRC)