Monitoring performance

The purpose of monitoring is to ensure that the concessionaire meets the agreed level of performance. Most of the monitoring roles will be carried out by the Sponsor, either by the Contract Management Team or by an Independent Engineer. However, it is important to remember that the private partner will also be monitoring the Sponsor’s performance to be sure it also upholds its end of the agreement.

The performance requirements will reflect the agreed risk allocations. Part of the purpose of monitoring performance against these standards is to ensure that risk is actually shouldered by the party who the risk was allocated to. These allocations will be different for different projects. Accordingly, performance requirements, criteria and monitoring roles will also vary.

The table below shows some examples of common performance requirements, criteria for measuring performance, monitoring arrangements, and examples of penalties for underperformance.

Example performance and monitoring matrix

Pre-operative stage
Performance requirements	Performance criteria	Monitoring arrangements		Example Penalties
Achieving financial close	Relevant financial documents are effective and finance is available	Reporting by the concessionaire (“Reporting”)		Financial penalty for delay
Carrying out technical planning and design	Specifications and standards	Reporting, evaluation by the Sponsor
Environmental and social management assessments and planning	Assessments made and plans in place	Reporting, evaluation by the Sponsor
Obtaining permits / approvals	Required permits are obtained May include Sponsor obligations	Reporting
Land acquisition	Rights to land acquired – obligation typically on the Sponsor	Sponsor reporting, providing legal entitlement		Financial penalty for delay
Project management arrangements	Project management plan, systems and staff in place	Reporting
Construction stage
Performance requirements	Performance criteria	Monitoring arrangements	Example Penalties
Site-related obligations	Access, site condition, safety, utilities etc May include obligations on the Sponsor, such as granting access	Testing, inspections	Concessionaire required to remedy any failings. Sponsor to pay compensation in case of access delays.
Meeting the design specification, construction quality	Specifications and standards	Testing, inspections	Concessionaire required to remedy any failings. May also incur delay penalties.
Meeting construction schedule and timelines	Construction milestones – including dates; Reporting requirements (progress reports, including frequency – eg, monthly)	Reporting	Concessionaire pays time-based damages during period of delay
Implementing environmental and social safeguards		Reporting, consultations with affected parties, environmental testing	Concessionaire required to remedy any failings. May include compensation and damages payments.
Notes: The Concession Agreement will specify the testing requirements, including who is responsible for carrying out the tests, schedule for testing, and who will bear the cost. Also to be clearly specified, with measurable performance criteria, are the requirements and standards to be met before the construction can be declared complete.
Operation stage
Performance requirements	Performance criteria	Monitoring arrangements		Example Penalties
Quality of services	Specifications and standards: Traffic flows, speed, pavement condition and condition of signs and lighting; availability of toll booths; length of closure times in case of accident, repair etc	Tests, inspections, user complaints procedure
Maintenance	Schedules, including dates; Specifications and standards	Tests, inspections, reporting
Financial reporting	Schedules, including dates; Accounting standards	Reporting, audits
Notes: The Concession Agreement will specify the testing requirements, including who is responsible for carrying out the tests and who will bear the cost.
Contract closure and asset transfer stage
Performance requirements	Performance criteria	Monitoring arrangements		Example Penalties
Asset quality at handover	Specifications and standards	Tests, inspections		Concessionaire required to remedy any failings. Withholding of Termination Payment
Documentation, records, titles	Completeness, timeliness	Reporting and auditing
Notes: The Concession Agreement will specify the testing requirements, including who is responsible for carrying out the tests and who will bear the cost. Also specified will be measurable requirements for declaration of contract closure and release of termination payment.

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