The Signalling Programme

Fjernbane Infrastructure East

Contract Document
Appendix 13 Incentives and Penalties
 Banedanmark
The Signalling Programme
Amerika Plads 15
DK-2100 Copenhagen E
Denmark
Author: Fjernbane
Signalling System Project
Mail: Fjernbane@bane.dk
Phone: +45 8234 0000
www.banedanmark.dk

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 Appendix 13 Incentives and
Penalties
Table of Contents Page

1 Change Log 4

2 Introduction 5
2.1 Purpose and Contents 5
2.1.1 Purpose 5
2.1.2 Contents 5
2.1.3 Relationship to other Appendices 5
2.1.4 Overview of Penalties and related caps 6
2.2 Readers Instructions 7

3 Bonus Scheme 8

4 Possessions 9

5 Replacement of Key Resources 11

6 Time of Delivery 12
6.1 Penalties for late Delivery 12

7 Performance of Delivery 14
7.1 RAM Performance before Final Acceptance 14
7.2 RAM Performance after Final Acceptance 14
7.2.1 Penalties regime for Severity Levels 1 to 4 14
7.2.2 Reliability Penalties regime for Severity Level 5 17
7.2.3 RAM Penalties invoicing 17
7.3 Performance after Adjustment or Cessation of the Service Level Goals
Obligation 18

8 Penalties for Separate Tasks 19

8.1 Possessions 19
8.2 Time of Delivery 19
8.3 Performance of Delivery 20

9 References 21

10 Attachments 22

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1 Change Log

Made by Version Commented Approved by Status

by
XJVG 1.0 Contract document
31.01.2012

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2 Introduction

2.1 Purpose and Contents

2.1.1 Purpose

Appendix 13, in accordance with section 15 of the Contract, specifies a number of

financial Incentives and Penalties for the Supplier.

The Incentives and Penalties have been set up in order to provide an added financial
Incentive for the Supplier to provide a performance which is satisfactory to the Customer.

2.1.2 Contents

The Incentives and Penalties mainly consist of:

A general Bonus Scheme (section 3)

Penalties related to Possessions (section 4)
Penalties related to Replacement of Key Resources (section 5)
Penalties related to Time of delivery (section 6)
Penalties related to Performance of delivery (section 7)
Penalties related to Separate Tasks (section 8)

2.1.3 Relationship to other Appendices

In brief, the main relationships between Appendix 13 and the other appendices referenced
in Appendix 13 can be described in the following way:

Appendix 17 Glossary [1] defines a number of terms and abbreviations. These

terms and abbreviations are used in this appendix.
Appendix 1 Time Schedule [2] defines the time schedule for the Delivery. The
Penalties related to Time of Delivery in section 6 of this appendix are attached to
milestones defined in Appendix 1.
Appendix 16 Process [3] defines the process for assignment of Possessions,
which is relevant for the understanding of the Incentives and Penalties related to
Possessions in section 4 of this appendix.
Appendix 10 Project Organisation/Execution [8] defines the Key Ressources.
Penalties related to replacement of Key Ressources without the Customers prior
written consent is described in section 5.
Appendix 11 Customer's Participation [4] and Appendix 12 Payment and Pricing
Schedule [5] state the Requirements for pricing of Possessions supplied to the
Supplier. The Penalties related to Possessions in section 4 of this appendix
supplements this pricing regime.
Appendix 6 Service Level Goals [6] and Appendix 5 Maintenance [7] defines the
performance Requirements of the Delivery. The Incentives and Penalties related
to Performance of Delivery in section 7 of this appendix are attached to
performance Requirements defined in Appendix 6.

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2.1.4 Overview of Penalties and related caps

Penalties and the related caps are divided in three main groups: Those for the Delivery,
those for Separate Tasks and those for the Maintenance period (Maintenance Subphase 1
& 2). The penalties and caps for the three groups are summarised in the tables below with
reference to where further information can be found in this appendix or in other, related
documents.

2.1.4.1 Delivery
For the Delivery the following Penalties and caps apply:

Penalty type Calculation Penalty size Cap Aggregated

unit cap
Possession over- Fixed amounts Depending on of Total
runs Possession type Price of the
Cf. chapter 4 in this Delivery
appendix
Replacement of Fixed amounts
Key Resources per month per per
without the affected Key Key
Customers Resource Resource
consent
Cf. chapter 5 in this
appendix
of Total
Delay with Final Percentage of per Price of the
Acceptance of a Total Price of calendar day for Delivery
Cf. chapter 15
Partial Delivery affected Partial high priority
in the Contract
Cf. chapter 6 in this Delivery Partial
[9]
appendix Deliveries.
per
of Total
calendar day for
Price of the
all other Partial
Delivery
Deliveries
Delay with Final Percentage of per
Acceptance of the Total Price of calendar day
Delivery the Delivery
Cf. chapter 6 in this
appendix

2.1.4.2 Separate Tasks

For Separate Tasks the following Penalties and caps apply:

Penalty type Calculation Penalty size Cap Aggregated

unit cap
Possession over- Fixed amounts Depending on of Total
runs, Separate Possession type Price of the of Total
Tasks Separate Price of the
Cf. chapter 8 in this Task Separate
appendix Tasks
Delay with Percentage of of Total of Total Cf. chapter 15
Separate Task Total Price of Price of the Price of the in the Contract
Cf. chapter 8 in this the Separate Separate Task Separate [9]
appendix Task Task

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2.1.4.3 Maintenance period
For the Maintenance period the following Penalties and caps apply:

Penalty type Calculation unit Penalty size Cap Aggregated

cap
Replacement of Fixed amounts
Key Resources per month per per
without the affected Key Key Resource
Customers Resource
consent
Cf. chapter 5 in this
appendix
RAM Percentage of From
performance of quarterly
Partial Delivery maintenance fee
after Final
Acceptance,
Severity Levels 1
to 4 of yearly
Cf. chapter 7 in this maintenance
appendix fee
Reliability Fixed amounts Cf. chapter 15 in
performance of per Clear Case the Contract [9]
Partial Deliver
after Final
Acceptance,
Severity Level 5
Cf. chapter 7 in this
appendix
Delay with Fixed amounts
delivery or per calendar
factory repair of day per spare
forwarded spare part
parts
Cf. chapter 7 in this
appendix

2.2 Readers Instructions

This section contains readers instructions.

Each section (from section 3 onwards) may contain:

Guides in italics (Examples and/or explanatory text to support some requirements)

Minimum requirements for the Supplier (each identified by MR13.x, where x is a
unique number).
Requirements for the Supplier (each identified by R13.x, where x is a unique
number).
Figures and Tables
References are referred to as [x], where x is the reference number. A list of references
is provided in section 9.
Attachments are referred to as {x}, where x is the attachment number. A list of
attachments is provided in section 10.

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3 Bonus Scheme
The Customer is planning to establish a bonus scheme.

The Customer intends to tailor the contents of the bonus scheme to the scope of Delivery
finally agreed in the Contract with the Supplier, so that the System is optimised towards
critical aspects of the Delivery and the strong and weak sides of the Supplier.

The above cannot be achieved if the bonus scheme is fully designed and published in
advance. Therefore, the exact scope and conditions of the bonus scheme will be decided
by agreement with the Supplier.

Preliminary areas to incentivise are:

Minimisation of disruptions to passenger traffic during Installation
Early time of completion and/or recapturing delays not caused by the Supplier

The Customer envisages that the conditions will be based on the following parameters:
Participation in the bonus scheme will be voluntary for the Supplier and subject
to mutual agreement.
The bonus scheme shall complement, but not obviate, the terms of the Contract.
Bonuses will be paid upon the actual fulfilment of the specific Requirements
only. The Supplier will not be able to issue claims for "loss of bonus" if the
specific Requirements cannot be fulfilled due to the actions of the Customer or
third parties.

The bonuses payable by the Customer will not exceed (in 2011 prices).

Value Management cost savings (cf. Appendix 16 Processes [3]) are not part of the bonus
scheme and not included in the bonus cap above.

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4 Possessions
The proper management of the Supplier's Infrastructure works is essential to achieving
Delivery on time.

A particularly critical part is the management of Possessions. Possessions are assigned by

the Customer and are in general scarce and also needed for other purposes (e.g. track
maintenance).

Generally Possessions which affect traffic will need to be arranged in good time so that
Train Operating Companies can adapt their services and inform the Passengers.
Possessions with a significant effect on traffic can therefore be difficult or even
impossible to obtain.

When a Possession has been planned and agreed in advance, but it is not possible to lift
the Possession at the agreed time it is considered as a "possession over-runs".It is
particularly important to avoid such over-runs, since they cause severe unscheduled
delays and cancellations. Penalties for Possessions over-runs are described in this section.

MR13.001 The Supplier shall pay the Customer a Penalty where a Possession over-runs.

MR13.002 The Penalty for Possession over-runs shall be calculated by applying the hourly rate
associated with the relevant Possession type found in the table below. For the first hour of
a particular Possession over-run, one fourth of the hourly penalty rate is applied for each
quarter of an hour commenced. For Possession over-runs lasting more than one hour, the
hourly rate is applied for each hour commenced. The division of the Fjernbane into 1st,
2nd and 3rd priority Lines is found in Appendix 11 Customers Participation [4] together
with the definitions of the different Possession types.

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 DKK per section/Station per hour Engineering Hours or 3-week closure
in 2011 prices Weekend closure
1st priority Line
1 out of 2 or more tracks, Not possible1)
2 out of 4 tracks,
1 out of 1 track or
part of a Station

2nd priority Line

1 out of 2 tracks or Not possible1)
part of a Station

2 out of 2 tracks,
1out of 1 track
or an entire Station

3rd priority Line

Part of a Station Not possible1)

1out of 1 track or
an entire Station
1)
Possession type cannot be obtained, cf. Appendix 11 Customers Participation [4]

Guide:
Example of Penalty calculations:
An Engineering Hours Possession that normally ends at 05:00 runs over. The Possession
covers two sections (2 out of 2 tracks) and one entire Station on a 2nd priority Line.
1. Case 1 The over-run is 40 minutes:
The Supplier shall therefore pay a Penalty for three quarters of an hour. The
penalities found in the table above are given as hourly rates and must therefore
be converted. In this case, the hourly rate is per section/Station
which therefore becomes /4= per quarter of an hour per
section/Station.
As mentioned above, does the Possession cover two sections and one entire
Station. The total Penalty to be paid by the Supplier is therefore 3 x 3 x =

2. Case 2 The over-run is 1 hour and 30 minutes:

The Supplier shall in this situation pay a penalty for two full hours. The
Possession covers again two sections and one entire Station, so the total penalty
to be paid is therefore 3 x 2 x = .

MR13.003 The total amount of Penalties for Possession over-runs related to completion of the
Delivery shall not exceed of the Total Price for the Delivery.

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5 Replacement of Key Resources
Appendix 10 Project Organisation / Execution [8] and Appendix 5 Maintenance [7]
define certain of the Suppliers staff as Key Resources and requires that these Key
Resources are not replaced without the prior written consent of the Customer. Rules
related to Key Resources including replacement of Key Resources and Acceptance of
new Key Resources can be found in the Contract [9].

MR13.004 The Supplier shall pay the Customer a Penalty if the Supplier replaces any Key Resource
without the Customers prior written consent (unless the Contract entitles the Supplier to
carry out the replacement without the Customers consent).

MR13.005 The Penalty per affected Key Resource shall be calculated as for each
month commenced without the Key Resource, with a maximum of for
each Key Resource.

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6 Time of Delivery
Receiving the completed Delivery (and Partial Deliveries) in due time is of high value to
the Customer. The Penalty scheme below is designed to reflect this consideration.

6.1 Penalties for late Delivery

MR13.006 The Supplier shall pay a Penalty if the Supplier does not achieve Final Acceptance of a
Partial Delivery by the deadline for completion specified in Appendix 1 Time Schedule
[2].

Guide:
The completion of a Partial Delivery is tied to a Critical Milestone in Appendix 1 Time
Schedule [2].

MR13.007

MR13.008 For high priority Partial Deliveries, the Penalty shall be calculated as of the Price
of the Partial Delivery for each calendar day which the Supplier is in delay with the
completion of the Partial Delivery.

Guide:
The Penalty is paid on a daily basis and will not be prorated.

MR13.009 For all other Partial Deliveries, the Penalty shall be calculated as of the Price of
the Partial Delivery for each calendar day which the Supplier is in delay with the
completion of the Partial Delivery.

Guide:
The Penalty is paid on a daily basis and will not be prorated.

MR13.010 The Supplier shall pay a Penalty if the Supplier does not achieve Final Acceptance of the
Delivery by the deadline for completion specified in Appendix 1 Time Schedule [2].

Guide:
The completion of the Delivery is tied to a Critical Milestone in Appendix 1 Time
Schedule [2].

MR13.011 The Penalty shall be calculated as of the Price for the Delivery for each calendar
day which the Supplier is in delay with the completion of the Delivery.

Guide:
The Penalty is paid on a daily basis and will not be prorated.

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MR13.012 The total amount of Penalties for late delivery shall not exceed of the Total Price of
the Delivery.

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7 Performance of Delivery
This section imposes Penalties upon the Supplier if the Service Level Goals performance
of the Partial Deliveries and the Delivery fall short of the RAM Targets in section 4 of
Appendix 6 Service Level Goals [6].

The extent of the Supplier Service Level Goals liability is defined in section 4.2.1 of
Appendix 6 Service Level Goals [6]. The terms defined in Appendix 6 Service Level
Goals [6] also apply throughout this section, notably Failures, Failure Impacts, Clear
Cases and Severity Levels.

7.1 RAM Performance before Final Acceptance

RAM performance Penalties do not apply prior to Final Acceptance of a Partial Delivery.
A successful Reliability Demonstration Test is a prerequisite for its Final Acceptance,
however. Delays to achieve this could lead to Penalties for late Delivery, cf. section 6 of
this appendix. The conditions for Final Acceptance are stated in the Contract [9].

7.2 RAM Performance after Final Acceptance

The RAM performance Penalties described in this subsection are applicable to those parts
of the Delivery that have passed Final Acceptance.

By the Contract [9], the Supplier warrants that the Service Level Goals will be sustained
during the Maintenance period.

Appendix 5 Maintenance [7] requires the Supplier to ensure that the data necessary to
calculate RAM figures are collected, saved and presented in the agreed format during the
Maintenance period.

The Customer will evaluate the performance of the Signalling System relative to the
RAM Targets defined in Appendix 6 Service Level Goals [6].

7.2.1 Penalties regime for Severity Levels 1 to 4

7.2.1.1 Penalties related reliability

MR13.013 Reliability performance Penalties shall only apply to those parts of the Delivery which
have passed Final Acceptance.

MR13.014 For Failures of Severity Levels No Operational Impact (1), Low Operational Impact (2),
Medium Operational Impact (3) and High Operational Impact (4), Reliability
performance Penalties are calculated at the end of each calendar based on the sum of the
fees during that calendar year (referred to as the Maintenance Fees of the Period
hereinafter).

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MR13.015 The Penalty for Reliability performance during any calendar year shall be calculated as
follows:

Based on the Reliability targets, a score, , shall be calculated on a yearly basis using
the four severity levels No Operational Impact (1), Low Operational Impact (2), Medium
Operational Impact (3) and High Operational Impact (4):

where

Severity Level, i Weighting

factor,
No Operational Impact (1) 1
Low Operational Impact (2) 2
Medium Operational Impact (3) 4
High Operational Impact (4) 8

Table 1

With calculated, the Penalty for Reliability performance payable by the Supplier to the
Customer shall be determined as:

No Penalty shall apply

A Penalty shall be calculated as

This is illustrated in Figure 1:

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 Penalty

Figure 1

MR13.016 Partial Deliveries that have passed Final Acceptance during a calendar year shall not be
included in the Penalty calculations for that calendar year. The Reliability performance
data captured for these Partial Deliveries from the date of their Final Acceptance to the
end of that calendar year will be discarded. Only Reliability performance data from the
first full calendar year after Final Acceptance and onwards shall be used for Penalty
calculations. This also applies to the first Partial Delivery (Early Deployment).

7.2.1.2 Penalties related availability

MR13.017 Availability performance Penalties shall only be applicable after Final Acceptance of the
Delivery.

MR13.018 The Penalty for Availability performance during any given calendar year shall be
calculated as follows:

Based on the Availability targets, a score, , shall be calculated on a yearly basis using
the four severity levels No Operational Impact (1), Low Operational Impact (2), Medium
Operational Impact (3) and High Operational Impact (4):

where

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 With calculated, the Penalty for Availability performance payable by the Supplier to
the Customer shall be determined as:

No Penalty shall apply

A Penalty shall be calculated as

Note:
The principle is similar to the Penalty on Reliability performance illustrated in Figure 1
above.

MR13.019 The Availability performance Penalty shall be calculated at the end of each calendar year
after Final Acceptance of the Delivery based on the Observed Failure Impacts during that
calendar year starting at the end of the first full calendar year. Availability performance
data collected between the date of Final Acceptance of the Delivery and the end of that
calendar year is discarded.

7.2.2 Reliability Penalties regime for Severity Level 5

MR13.020 At any time, including the Roll-out Phase, if a Clear Case as defined in section 4.4.2 in
Appendix 6 Service Level Goals [6] is deemed for the Severity Level No Operation (5),
the Supplier shall pay a Penalty of (2011 prices) to the Customer.

MR13.021 A Penalty does not clear the Clear Case, i.e. a subsequent further Failure within too short
a time compared to the Target MTBF generates a new Clear Case and a further Penalty.

Example:
If the Customer has deemed a Clear Case because the Supplier has had 2 consecutive
Failures of No Operation (5), with a time interval in between that is smaller than 80% of
the minimum required MTBF, the Supplier shall pay a Penalty of to the
Customer. If a third consecutive Failure of No Operation (5), all with time intervals in
between that are less 80% of the minimum required MTBF is observed, this is considered
as a another Clear Case and the Supplier shall therefore pay an additional Penalty of
to the Customer.

Guide:
The Clear Case definition thresholds in Appendix 6 Service Level Goals [6] are not
apportioned by the part of the Delivery which has passed Final Acceptance. This means
that the final RAM Targets will be used for defining the Clear Cases throughout the Roll-
out Phase.

7.2.3 RAM Penalties invoicing

MR13.022 Penalties shall be invoiced separately on a yearly basis.

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7.3 Performance after Adjustment or Cessation of the
Service Level Goals Obligation

During the duration of the Contract [9], the Suppliers obligation to achieve the RAM
Targets may be adjusted or cease completely. In particular, this may occur due to partial
termination of Maintenance (see Appendix 5 Maintenance [7]) or due to the Customer
performing certain significant changes where it has been specified in Appendix 16
Processes [3] that doing so will have an impact on the Service Level Goals warranty.

When the Service Level Goals are adjusted due to partial termination of Maintenance, the
Supplier will no longer be subject to an obligation to achieve the RAM Targets for the
terminated maintenance areas, but the Supplier will be responsible for achieving the
adjusted RAM Targets for the maintenance areas still performed by the Supplier, cf.
Appendix 5 Maintenance [7].

In case of partial termination of maintenance, the Supplier is still obligated to deliver

spare parts and consumables within agreed lead times and to perform factory repair of the
failed parts for the Customer within agreed repair times, see Appendix 5 Maintenance [7].
The Supplier shall pay a Penalty if he fails to fulfil these obligations.

MR13.023 When the RAM Targets described in Appendix 6 Service Level Goals [6] are changed (i.e
they are adjusted or cease to apply), the change shall apply to the Penalty calculation
from the date upon which the change become effective. If the change becomes effective
during a calendar year, the Penalty shall be calculated separately for the part of the
calendar year before the date on which the change becomes effective and for the
remainder of the calendar year, so that the Penalty for each of these periods will be
calculated based on the RAM Targets and maintenance fees applicable to each period.

MR13.024 If the Supplier is not obligated to achieve any RAM Targets for a particular maintenance
area, but obligated to deliver spare parts and consumables within agreed lead times, the
Supplier shall pay a Penalty each time the Supplier does not provide spare parts and
consumables within the agreed lead times.

MR13.025 If the Supplier is not obligated to achieve any RAM Targets for a particular maintenance
area, but obligated to perform factory repair of parts within agreed repair times, the
Supplier shall pay a Penalty each time the Supplier does not perform factory repair of the
parts forwarded for repair by the Customer within the agreed repair times.

MR13.026 The Penalties for delayed spare parts/consumables and delayed factory repairs shall be
calculated as per spare part/consumable/factory repair order for each
commenced calendar day of delay until said spare part/consumable/factory repair has
arrived at the Customers premises.

Guide:
A spare part/consumable/factory repair order may cover a delivery of multiple spare
parts/consumables/factory repairs as well as a combination of those.

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8 Penalties for Separate Tasks
This section of Appendix 13 describes how Penalties are applied to changes ordered as
Separate Tasks, cf. clause 6.3 of the Contract.

For Options ordered as Separate Tasks, reference should also be made to Appendix 3.8
Options [10].

8.1 Possessions

MR13.027 The Penalties on Possession over-runs in section 4 of this appendix shall apply to changes
ordered as Separate Tasks.

Guide:
This implies that the Penalties on Possession over-runs shall apply to Separate Tasks.
These Penalties will only be applied where the Separate Task in question can actually
cause a Possession over-run which may not be the case for most Separate Tasks.

MR13.028 The total amount of Penalties for Possession over-runs shall not exceed of the Total
Price of the Separate Task.

8.2 Time of Delivery

MR13.029 The Supplier shall pay a Penalty if the Supplier does not complete the delivery of an
important change ordered as a Separate Task by the agreed deadline for completion of the
Separate Task (as specified in Appendix 1 Time Schedule [2] when the appendix has
been updated further to the Parties agreement of the Special Task).

Guide:
The Customer states in the individual Change Request whether a particular change is
important.

MR13.030 The Penalty shall be calculated as of the Total Price of the

Separate Task for each calendar day (or part of a calendar day) which the Supplier is in
delay, where X represents the total amount of calendar days agreed for delivery of the
important change.

Guide:
As an example, delay with completion of an important Separate Task priced at
with an agreed delivery time of 1,000 days would incur a daily Penalty of
.

MR13.031 The total amount of Penalties for late delivery shall not exceed of the Total Price of
the Separate Task.

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 Guide:
The maximum delay Penalty would be reached when the delay reaches the threshold
in the Contract (after which further delay will be grounds for termination of the
Contract).

8.3 Performance of Delivery

No general Penalties for performance have been defined for Separate Tasks.

Guide:
It should be noted that if a Separate Task results in an increase in the maintenance fee,
the Penalties on RAM performance in section 7.2 will increase correspondingly, as they
are calculated as a percentage of the maintenance fee.

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9 References
Ref. no. Ref. ID
1 E117.000 Appendix 17 Glossary
2 E101.000 Appendix 1 Time Schedule
3 E116.000 Appendix 16 Processes
4 E111.000 Appendix 11 Customer's Participation
5 E112.000 Appendix 12 Payment and Pricing
Schedule
6 E106.000 Appendix 6 Service Level Goals
7 E105.000 Appendix 5 Maintenance
8 E110.000 Appendix 10 Project
organisation/Execution
9 E100.500 Contract
10 E103.800 Appendix 3.8 Options

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10 Attachments
None

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