A survey of the payment mechanisms for transportation DBFO projects in British Columbia

• Published in: Construction Management and Economics 2007-05, Vol.25 (5), p.529-543
• Main Author: Abdel Aziz, Ahmed M.
• Format: Article
• Language: English
• Subjects: Compensation; Contracting; DBFO; infrastructure; payment mechanism; Payment systems; project delivery; Project management; Public private partnerships; Studies
• ISSN: 0144-6193; 1466-433X; 1568-5551
• DOI: 10.1080/01446190601161465

In traditional project delivery systems, payment mechanisms provide compensation for the work performed using construction capital payments. In the alternative public-private partnership (PPP) systems, payment mechanisms follow the selected PPP system. For example, the build-operate-transfer system provides compensation based on project demand using real-tolls usage payments; the design-build-finance-operate (DBFO) system provides shadow-tolls usage payments; and the performance-based DBFO system provides compensation based on contractor's performance using service availability payments. Designing the payment structure is an important task where several factors have to be considered. This paper analyses the implementation of payment mechanisms in a number of DBFO transportation projects in BC, Canada, in terms of payment structure, payment types and characteristics, determination and funding. The analysis provides insights for the design of payment mechanisms. The analysis shows that more payment types are being used and that the mechanisms are designed to achieve specific government objectives. The analysis refers to a new 'hybrid' payment mechanism with elements derived from the traditional and the PPP systems. The hybrid system may have potential to minimize the overall project cost; however, agencies have to be flexible in the delivery concepts as combinations of payments for inputs, usage and services might have to be used.