Availability Payments and Impact on Design Approach

An availability payment is a means of compensating a private concessionaire for its responsibility to design, construct, operate, maintain, and make available a facility for a set period of time with certain performance standards and key performance criteria.

An availability payment is a means of compensating a private concessionaire for its responsibility to design, construct, operate and maintain a facility for a set period of time. Availability payments are made by the public agency or institution based on particular project milestones, including a completion deadline and/or facility performance standards. Performance standards are measured operationally and according to occupant satisfaction. Operational considerations can include room air temperature, cleanliness, and speed of light bulb replacement. Occupant satisfaction measures customer service, performance, the completion of preventative maintenance, testing of equipment, and inspection of space. 

On the Long Beach Courthouse project, for example, there were no milestone payments associated with project development and the availability payments did not commence until the project achieved Occupancy Readiness of the space. After occupancy, receipt of the availability payment is predicated upon the performance of the facility, which mandates the facility manager is performing all required tasks and the space is in the specified condition. There are detailed key performance indicators by which the condition of the space and performance of the facility manager are measured. Predetermined deductions to the availability payment are instituted if key performance indicators are not met or achieved or if portions or all of the facility are unavailable for use. 

In contrast to traditional design-bid-build delivery, the transactional requirements of the performance based infrastructure (PBI) turnkey approach drive the need for a fully integrated design process involving the architect, engineers, contractor and facility manager. When working with public agencies under more traditional delivery approaches, the objective is almost always to lower first cost. In the case of lowest bid selection, the long term operating and life cycle costs are often driven upward as a result of the selection of shorter lived equipment and less durable materials. Unfortunately, this rarely seems to get factored in by the public sector.

With the risk of long-term operations and lifecycle costs built in to the transaction structure, choices in building systems and finish materials are driven not by initial cost but by total cost over the entire concession period and beyond.

Examples of the types of choices made during initial design and pricing include evaluations of the durability of finish materials and the ultimate lifecycle costs, including replacements and renewals, over the term of the agreement as well as in consideration of facility condition assessment requirements at the conclusion of the term. For example, when evaluating the floor finishes in high traffic areas, the selection of terrazzo flooring versus carpeting made much more economical sense when considered over the agreement term, even though terrazzo flooring has a much higher first cost. Terrazzo is much more durable and enables the concessionaire to avoid frequent carpet replacements and associated costs and impacts on the availability of space. Another example is to carefully consider the building systems. The Long Beach Courthouse team chose to construct enclosed penthouses on the roof to provide additional protection for the mechanical systems against the marine environment of Long Beach. While more expensive initially, this solution provided better serviceability and lower lifecycle costs while avoiding potential deductions from unavailability issues that might arise from custom large rooftop package units.