The following overriding principles and requirements will apply when determining the amount of Compensation payable in respect of a Compensation Event.
(a) Government must receive value for money.
(b) Subject to paragraph (f), the private party will not be entitled to Compensation for any indirect or consequential loss.67
(c) The private party will prepare and submit a change notice to government, describing and providing details of the Compensation Event (such as the impacts, time and cost consequences, savings, mitigating factors and proposed funding) as a condition precedent to its entitlement to adjustment or payment in respect of the event.
(d) The private party must provide government with all quotations it receives in relation to the Compensation Event on an open-book basis.
(e) The private party and its associates are not entitled to any compensation for indirect costs.
(f) During the bid phase of the project, the private party will be required to bid fixed or maximum margins and other specified on-costs (including preliminaries) that the private party or its major sub-contractors may apply to the cost of Modifications during both the design and construction phase and the operating phase. These will be taken into account in evaluation of the bids and, once agreed by government, will be included in the project agreement. The private party and its major sub-contractors will not be entitled to recover any margin or costs for modifications above the amounts specified in the project agreement. As a general rule, government does not Compensate the private party for profit margins (unless it is demonstrated to be value for money to do otherwise and in respect of government-initiated Modifications above a certain value) and will only Compensate reasonable sub-contractor profit margins.
(g) Government has the right to appoint an independent expert to audit any quote or information provided by the private party (and, if appropriate, provide an alternative cost estimate). Alternatively, government may require the private party to carry out a tender process where the Compensation claimed in respect of a Compensation Event is likely to exceed a certain threshold as specified in the project agreement.
(h) The private party is required to make a claim under its insurance policy for any damage or liability arising as a result of the Compensation Event occurring.
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67 This does not limit the private party's entitlement to recover for economic loss under any advanced consequential loss insurance it may have in respect of Force Majeure Events.