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The PPP Company’s Best Friend

Company News / PR

18/12/15 | Sally Wotton

Jacqueline Walpole and Tom Pinnock explain why a new generation, out-of-the box PayMech solution is the best yet at contributing to a PPP service provider's returns - rather than providing their authority paymaster with an additional stick to beat them with.

The popularity of public authorities adopting a PPP (public-private partnership) approach, also known as PFI (private finance initiative), to the operation of public services and facilities continues at pace, particularly in the UK and the former commonwealth countries. This means that there is an ever-growing bank of experience, learning and precedent being accumulated by the organisations intimately involved in servicing the operation of PPPs. This approach primarily spans education (schools and colleges), health services (hospitals and health centres) and national and local government authority operations (civil service offices, government departments, prisons and detention centres).

It is arguable that no business partner's accumulated experience benefits the provider company carrying out PPP contracts more importantly than the one providing the payment mechanism (PayMech) function: the computer utility used to calculate the fee due to the provider each month. This is because it is in the nature of the PPP philosophy that annual/monthly service payment to the provider is the pre-agreed, tendered-for, sum - less deductions for under- performances (characterised primarily by sub-standard quality issues and the unavailability of facility resources). This partner's position can be considered to be strengthened even further if the PayMech function is closely integrated with the computer aided FM (CAFM) data sources recording, and providing to the PayMech, all the relevant aspects of the day-to-day servicing of the contract. There are inherent benefits, in set-up and day-to-day operation, in working with a supplier which owns the process from end-to-end.

A PPP arrangement requires the provider to deliver to the specified, agreed service level and no more. There is no bonus or incentive element (profit), in financial terms, to be made from over-servicing and performing beyond the call of duty on a contract, only deductions from the contracted fee for events of under-performance. The reasons for under-performance are multifarious, set out in the hundreds of pages of a PPP contract specification - and if occurring in combination they can invoke a harsh, compounding, multiplier effect that results in enlarged penalties.

The PayMech calculates based on the deficiencies of specified service performance across the sites involved in a PPP contract.

Each calendar day is typically broken down into one, two or three performance periods (perhaps of differing priorities) for which any part of a facility can be considered as available - or not. The number of periods a service is missing (or below quality/causing an area to be unusable) usually provides one parameter applied to determine a deduction.

All the serviced and maintained spaces within the sites covered by a contract are itemised and allocated prioritised weightings of relative importance (an operating theatre, for instance, would be accorded higher weighting than a nurses' station). So are the services being delivered within (maintaining a college language laboratory being higher priority than providing drinks machines, perhaps), as well as maintenance of the buildings and associated building services systems. Priority ratings also influence the size of a deduction. Additional, compounding penalties, ‘ratchets', will be layered over the top of this structure where faults recur/persist (perhaps above pre-set repeat thresholds) or are deemed particularly heinous in relation to aspects such as health and safety.

The establishment of the database(s) relating to all these aspects and the subsequent timed, dated recording of services carried out, service level agreements required (and the quality level at which they are actually delivered) and of faults reported to a helpdesk and the speed of correction - or not, as the case may be - is, of course, the bread-and-butter of a CAFM system. The role of the PayMech is to ‘crunch' this performance data for the specified period and apply calculations based on weightings, priorities, ratchets and other mechanisms that determine the level that service falls below the required, contracted agreement. The PayMech is run and delivers the subsequent deductions (cost and points) for a given period's service shortfalls.

The more these deductions can be minimised the more successfully the PPP provider will be carrying out their role. Ultimately, of course, the ability of the provider to physically deliver to the letter on the contracted details is the most desirable way to eliminate deduction penalties. However, astute development and use of the PayMech utility can go a long way to assisting the service provider with ‘optimisation of minimisation' of deducted losses against the expected monthly return. The ability to run ‘what-if' variations of performance, reflect the up- to-the-minute status of service issues (increasingly via hand- held, mobile device inputs) and create status dashboards highlighting, reporting on and allowing mitigation of relevant areas of penalty risk to the monthly return are invaluable features of any well-thought-out PayMech.

To an outsider it may appear counter-intuitive that an authority operating a PPP would put the PayMech in the hands of its service provider: the common sense idea being that "the best way to be certain you are only paying what you owe is to calculate it yourself." However, the complexity and cost of operating the IT processes involved is not something an authority would wish to bear. So the responsibility of operating the PayMech is also handed to the provider as part of the contract - with additional penalties then associated with miscalculation and any inability to correctly carry out self-reporting of performance.

Having direct control of a credible, reliable PayMech presents a PPP service provider with an opportunity to make it work as effectively as possible in assisting in minimisation of penalty deductions: A PayMech must have the credibility to present the calculation of performance and any associated reporting to the satisfaction of the PPP authority.

A PayMech should allow the PPP service provider to operate in such a way that, given not all penalties can be avoided, it can be used to derive strategic approaches and work schedules that deal with the most costly potential penalties as the highest priorities for elimination.

A PayMech as a utility has evolved a long way from the original process which typically calculated by importation of CAFM data into a spreadsheet and then relied on the operation of a vast array of macros to apply the penalty functions and deliver a bottom-line figure to invoice. An ‘out-of-the-box' PayMech product is a relatively new thing, and the degree of individuality of each PPP contract is such that operation of any PayMech without tailoring and customisation remains an unrealised aspiration. As such, the consultancy contribution from a PayMech provider in assisting the PPP provider in getting the utility up and running, and offering ongoing operating support, still needs to be considered as a critical aspect of a PayMech purchase.

However, the accumulation of experience and identification of commonalities across a diverse range of PayMech environments has been coupled with advances in software development which minimise traditional back office code writing in favour of front-end-based, building- block workflow and web service functionality. This has allowed the development of well-rounded utilities.

What exists now can be delivered as a live, operational PayMech in roughly half the time it took to configure the previous generation. What is more, the configuration work is predominantly carried out by business consultants and others who will be on the front-line of the PayMech's day-to-day operation, rather than more distant, back office coders. The future-proofed, upgradable and reconfigurable nature of the techniques now used can be considered as having a potential 20-to-50-year life alongside the projected operating periods of some of the PPPs themselves