Payment and audit mechanisms for non private-funded PPP-based infrastructure maintenance projects

Abstract

The introduction of a non private-funded public-private partnerships (PPP) approach to the maintenance and operation of infrastructure facilities necessitates an equitable performance standard, a sensible penalty mechanism and a credible auditing system. Yet, with limited research on this type of scheme, it is not clear whether the payment and audit mechanisms can adequately gauge the performance of private partners and truly reflect the quality of service provided in their payment. The question is whether the reliability of the payment reduction and auditing mechanisms pertinent to the non-private funded PPP infrastructure maintenance can be systematically verified. With reference to a case study in Hong Kong, field data have been collected and tested according to the sensitivity analysis and level of confidence. The results indicate that the level of payment reduction due to poor performance is fair and the audit frequency is adequate to reflect the overall performance of the service provider. The approaches adopted in this research should provide an objective basis for public and private partners to formulate a mutually acceptable and effective mechanism for non private-funded PPP infrastructure maintenance contracts.