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3.3 Basis for Payment
The basis for payment for services should match (where possible) the:
- Nature and scope of the services; and
- The pattern of costs incurred by the provider.
The agency must agree a regime for determining payment. There are a number of possibilities:
- Fee for service – a set amount paid each time a client uses a service.
- Block payments - a predetermined payment for delivery of the service.
- Cost and volume – combines aspects of fee for service and block payments.
- Paying the cost of a particular input (e.g. a staff salary).
- Hybrid payments – a combination of some of the above payments. Typically relevant for complex services or a group of services.
- Special payments – made for activities outside the normal scope of the service (e.g. contributing to policy development, providing significant amounts of information above that required for monitoring).
There are a number of ways in which the payment can be structured (see section 4.3 below), including:
- In arrears.
- On delivery.
- By time period.
- In advance (at the beginning of the contract or before service delivery).
- At the end of the contract.
No payment should be made until the contract is signed. This is equally important for a conditional grant.
