Optimising profits under a performance-based contract

The party responding to the performance regime can vary their revenue and profits, according to how their investment, maintenance and operational decisions impact on performance. Cogitare can assist companies to maximise profits from a performance regime by advising firms on how to adapt their operations and strategy accordingly. We can:

• Train staff;
• Recommend modelling and data requirements/develop models to optimise investment, maintenance and operational decisions;
• Advise on how to incorporate performance in whole life-cost models.
• Making changes to a performance-based contract (e.g. standards changes)
  

Over time both parties will want to make changes to a contractual performance regime. The party managing the performance regime will want to improve incentives in certain areas, where they do not drive the desired behaviours, or change some of their requirements to reflect changes in demand and passenger wishes. The contractor may find elements of the performance regime onerous, or restrictive, and may wish for a relaxation of certain standards/contractual obligations. Since changes impact on performance rewards (and often also on costs) both parties need to understand the impact of changes on their future revenues and costs. Cogitare can assist through:

• Contract interpretation;
• Evaluation of revenue and cost impacts;
• Advice on contractual negotiating positions.

Experience

• Assisting Tube Lines adapt to, and maximise profits from, the Capability performance regime (identifying infrastructure improvements which will maximise performance bonuses relative to cost);
• Business case appraisal of power options for London Underground and commercial strategy to integrate with the PPP performance regime;
  Trained staff to manage Capability performance under the London Underground PPP contract;
• Developed the London Underground internal processes to manage PPP Capability performance;
• Advised London Underground on the application of the PPP Contract in relation to contract changes, including standards changes, which impact on the performance regime;
• Cogitare software, the Automated Single-train-simulator Database is used to evaluate the performance impacts of contract and standards changes.

For further information please refer to the Case Study: Cogitare and the London Underground Public Private Partnership (PPP).